IFRS for SMEs Income Taxes and Deferred Tax Flashcards

Under IFRS for SMEs, a deferred tax liability arises when:

Answer: The carrying amount of an asset exceeds its tax base

A deferred tax liability arises from a taxable temporary difference, which occurs when the carrying amount of an asset exceeds its tax base, resulting in future taxable amounts.

Under IFRS for SMEs, a deferred tax asset is recognized for deductible temporary differences:

Answer: Only to the extent that it is probable that sufficient future taxable profit will be available

IFRS for SMEs requires that a deferred tax asset for deductible temporary differences be recognized only when it is probable that future taxable profits will be available against which the deductible amount can be utilized.

Under IFRS for SMEs, deferred tax assets and liabilities are measured at:

Answer: The tax rates expected to apply when the temporary difference reverses, based on enacted or substantively enacted rates

Deferred taxes are measured using the tax rates expected to apply to the period when the asset is realized or the liability is settled.

Under IFRS for SMEs, which of the following temporary differences does NOT give rise to a deferred tax liability?

Answer: Initial recognition of goodwill not deductible for tax purposes

IFRS for SMEs provides an exemption from recognizing a deferred tax liability on initial recognition of goodwill where the goodwill is not tax-deductible.

Under IFRS for SMEs, current tax for the current and prior periods is measured at:

Answer: The amount expected to be paid (or recovered) using tax rates enacted or substantively enacted at the reporting date

Current tax is the expected tax payable or recoverable, calculated at tax rates and laws that have been enacted or substantively enacted by the reporting date.

Under IFRS for SMEs, deferred tax assets and liabilities are NOT discounted because:

Answer: The standard prohibits discounting, citing the complexity of scheduling temporary differences

IFRS for SMEs explicitly prohibits discounting of deferred tax assets and liabilities because reliable scheduling of temporary differences is often impracticable.