Accounting for Income Tax and Employee Benefits

Vocabulary flashcards based on the PAS 12 (Income Taxes) and PAS 19 (Employee Benefits) lecture review material.

Taxable Income

The income for a period determined in accordance with the rules established by the tax authorities upon which income tax is payable.

Accounting Income

The profit for a period before deducting tax expense.

Permanent Difference

A difference between accounting income and taxable income that does not reverse in future periods, such as interest income on government bonds subject to final withholding tax or non-deductible fines and penalties.

Deferred Tax Asset

An asset recognized under PAS 12 for deductible temporary differences or operating loss carryforwards to the extent that it is probable that taxable profit will be available against which they can be utilized.

Deferred Tax Liability

A liability recognized for taxable temporary differences, such as an excess of tax depreciation over accounting depreciation, which gives rise to future taxable amounts.

Tax Base of a Liability

The carrying amount of a liability less any amount that will be deductible for tax purposes in respect of that liability in future periods.

Current Tax Expense

The amount of income tax payable in respect of the taxable profit for the period.

Measurement of Deferred Tax Balances

The measurement of deferred tax assets and deferred tax liabilities using the tax rates that have been enacted or substantively enacted at the end of the reporting period.

Presentation of Deferred Tax Assets and Liabilities

The required presentation of deferred tax assets and deferred tax liabilities in the statement of financial position as noncurrent items.

Termination Benefits

Employee benefits payable as a result of an entity's decision to end an employee's employment before the normal retirement date under PAS 19.

Short-term Employee Benefits

Employee benefits expected to be settled wholly within $12\text{ months}$ after the end of the period in which the employees render the related service, such as paid annual leave.

Defined Contribution Plan

A post-employment benefit plan under which an employer's legal or constructive obligation is limited to the amount it agrees to contribute to the fund.

Defined Benefit Plan

A post-employment benefit plan where the actuarial risk and investment risk are borne by the entity or employer.

Net Interest on Net Defined Benefit Liability (Asset)

A component of defined benefit cost determined by multiplying the beginning net defined benefit liability (asset) by the discount rate based on high-quality corporate bonds.

Past Service Cost

The change in the present value of the defined benefit obligation arising from a plan amendment or curtailment, which is recognized immediately as an expense.

Remeasurements of Plan Assets

The difference between the actual return on plan assets and the interest income on plan assets, recognized in other comprehensive income.

Contributory Plan

A retirement plan under which both the employer and the employees contribute to the fund.

Funded Plan

A retirement plan under which the retirement fund is transferred to a trustee.

Gain or Loss on Settlement of a Defined Benefit Plan

The difference between the present value of the defined benefit obligation being settled and the settlement price.

Asset Ceiling

The present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

Cost of Accumulating Paid Absences

An expense recognized when the employees render the service that increases their entitlement to future paid absences.