IFRS for SMEs Income Taxes and Deferred Tax Flashcards

Under IFRS for SMEs, which of the following is an example of a deductible temporary difference?

Answer: A warranty provision recognized in accounting but only deductible for tax when the warranty is paid

A warranty provision creates a deductible temporary difference because it is recognized as a liability in accounting but becomes tax-deductible only when the cash is paid.

Under IFRS for SMEs, what is the tax base of a liability?

Answer: Its carrying amount less any amount that will be deductible for tax purposes in future periods

The tax base of a liability is its carrying amount less any amount that will be deductible for tax purposes in future periods, representing the amount that will not be deducted.

Under IFRS for SMEs, the total income tax expense presented in the income statement comprises:

Answer: Current tax expense plus deferred tax expense (or minus deferred tax income)

Total income tax expense includes both the current tax charge (based on taxable income) and the deferred tax movement (based on temporary differences).

Under IFRS for SMEs, when property is revalued and the gain is taxable only on disposal, the deferred tax liability is calculated using:

Answer: The tax rate that would apply to the gain on disposal of the asset

The measurement of deferred tax should reflect the tax consequences that would follow from the manner in which the entity expects to recover the carrying amount, which for a revalued asset is typically through disposal.

Under IFRS for SMEs, which of the following disclosures is required for income taxes?

Answer: The major components of income tax expense

IFRS for SMEs requires disclosure of the major components of income tax expense, though the disclosure requirements are less extensive than under full IAS 12.

Under IFRS for SMEs, when a deferred tax liability has been previously unrecognized under the initial recognition exemption, and later the exemption no longer applies, the entity should:

Answer: Recognize the deferred tax liability prospectively when the exemption ceases to apply

Once the initial recognition exemption no longer applies, the resulting deferred tax is recognized prospectively in the period the exemption ceases.