IFRS for SMEs Income Taxes and Deferred Tax Flashcards

Under IFRS for SMEs, where is the income tax expense related to items recognized in other comprehensive income (OCI) presented?

Answer: In other comprehensive income, not in profit or loss

Tax effects of items recognized in OCI are themselves recognized in OCI to ensure the tax follows the transaction it relates to.

Under IFRS for SMEs, a taxable temporary difference arises when:

Answer: An asset's carrying amount exceeds its tax base

A taxable temporary difference occurs when the carrying amount of an asset exceeds its tax base, creating a future taxable amount when the asset is recovered.

Under IFRS for SMEs, deferred tax assets and liabilities should be presented in the balance sheet as:

Answer: Non-current assets and liabilities

IFRS for SMEs classifies deferred tax assets and liabilities as non-current, reflecting their long-term nature.

An SME has unused tax losses. Under IFRS for SMEs, a deferred tax asset for those losses is recognized when:

Answer: It is probable that future taxable profits will be available against which the losses can be utilized

A deferred tax asset for unused tax losses is recognized only when it is probable that sufficient future taxable profit will be available to absorb the losses.

Under IFRS for SMEs, deferred tax assets and liabilities may be offset when:

Answer: The entity has a legally enforceable right to set off current tax assets and liabilities and they relate to taxes levied by the same authority

Offsetting of deferred tax assets and liabilities is only permitted when there is a legally enforceable right and they relate to income taxes levied by the same taxation authority.

Under IFRS for SMEs, which event would trigger a reassessment of an unrecognized deferred tax asset?

Answer: An improvement in future trading conditions making it probable that future taxable profits will be available

At each reporting date, an SME must reassess unrecognized deferred tax assets, and if it becomes probable that sufficient future taxable profit will exist, the asset should then be recognized.