IAS 12 – Income Taxes (Vocabulary Flashcards)

Key vocabulary terms and definitions from the IAS 12 lecture notes, covering scope, tax base, temporary and permanent differences, DTAs/DTLs, exceptions, and related concepts.

Scope of IAS 12

The IFRS standard addressing current and deferred income taxes, including domestic and foreign taxes on taxable profit or loss and the effects of temporary differences and carry-forwards on IFRS financial statements.

Current taxes

Taxes payable or receivable in respect of the taxable profit or loss for the period, expected to be paid or recovered in the near term.

Deferred taxes

Future tax charges or reliefs arising from differences between IFRS carrying amounts and tax bases.

Tax base

The amount that will be deductible for tax purposes against future taxable benefits when recovering the asset or settling the liability.

Tax base of an asset

The amount deductible for tax purposes against future taxable benefits arising from recovering the asset’s carrying amount.

Tax base of a liability

Carrying amount less any amounts deductible for tax purposes in respect of that liability in future periods.

Temporary differences

Differences between the carrying amount of an asset or liability in IFRS and its tax base that will reverse in future periods.

Permanent differences

Differences between accounting and tax treatment that do not reverse and therefore do not give rise to deferred tax assets or liabilities.

Deductible temporary differences

Temporary differences that will result in deductible amounts against future taxable profits.

Taxable temporary differences

Temporary differences that will result in taxable amounts against future taxable profits.

Deferred tax asset (DTA)

A tax benefit recognized for deductible temporary differences and tax losses expected to reduce future tax payments.

Deferred tax liability (DTL)

A tax obligation recognized for taxable temporary differences expected to increase future tax payments.

Investment in subsidiaries – exceptions

In separate financial statements, recognize a DTL for taxable temporary differences related to investments in subsidiaries/branches/associates/JVs, unless control of reversal exists and reversal is not expected in the foreseeable future.

Initial recognition exemption

General rule that initial recognition of an asset or liability does not create a temporary difference for tax purposes (subject to exceptions like business combinations).

Business combinations – goodwill

No DTL is recognized on goodwill in a business combination.

Fair value uplift

The increase in asset/liability values recognized on acquisition that creates temporary differences for tax purposes.

Probable (for tax losses)

More likely than not; greater than 50% likelihood that future taxable profits will be available to utilize tax losses.

Tax losses in carry-forward

Unused tax losses that can be carried forward to offset future taxable profits, recognized only if probable future profits exist.

Tax rate (for deferred taxes)

The rate expected to apply when the asset is realized or the liability is settled, based on enacted or substantively enacted laws; if different rates apply, use the average rate expected to reverse.

Offsetting (presentation)

Netting current tax assets and liabilities (and similarly for deferred taxes) when legally enforceable and settlement on a net basis is intended.

Tax planning opportunities

Strategies to optimize tax outcomes considered in recognizing and measuring deferred taxes.

Withholding tax

Tax withheld on distributions (e.g., by foreign jurisdictions) that affects the overall income tax liability.