IFRS for SMEs) IFRS for SMEs Income Taxes and Deferred Tax

Question 1

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

Accepted Answer

The carrying amount of an asset exceeds its tax base

Answer

The carrying amount of an asset is less than its tax base

Answer

Tax is paid in advance of recognition in profit or loss

Answer

An entity uses accelerated depreciation for accounting

Question 2

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

Accepted Answer

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

Answer

Always, without any recoverability test

Answer

Only for losses carried forward

Answer

When tax rates are expected to decrease

Question 3

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

Accepted Answer

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

Answer

The current period's effective tax rate

Answer

Historical cost tax rates

Answer

An undiscounted estimate only

Question 4

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

Accepted Answer

Initial recognition of goodwill not deductible for tax purposes

Answer

Accelerated tax depreciation exceeding accounting depreciation

Answer

Revaluation surplus on property

Answer

Capitalized development costs deductible on a cash basis for tax

Question 5

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

Accepted Answer

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

Answer

The prior year effective tax rate applied to current taxable income

Answer

Management's best estimate without reference to enacted rates

Answer

The statutory rate published at the start of the year

Question 6

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

Accepted Answer

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

Answer

Discounting produces the same result as undiscounted amounts

Answer

Tax authorities do not recognize time value of money

Answer

IFRS for SMEs follows local GAAP in each jurisdiction