IAS 12 – Knowsia

FR – L2 – Q53 – Financial Reporting Standards

Differentiate between current tax and deferred tax per IAS 12 for Talu Ghana Limited.

Question

Talu Ghana Limited owns the following property, plant and equipment as at 31 December 20X6.

	Cost	Accumulated Depreciation	Carrying Amount
	GHe’000	GHe’000	GHe’000
Plant & machinery	45,000	9,000	36,000
Land	25,000	–	25,000
Office buildings	75,000	15,000	60,000

Additional pieces of information are:
(i) Plant and machinery are depreciated on a straight-line basis over 5 years. The plant & machinery was acquired on 1 January 20X6.
(ii) Land is not depreciated
(iii) Buildings are depreciated on a straight-line basis over 25 years.
(iv) Depreciation on office building is not deductible for tax purposes but for the plant and machinery; tax deductible is granted over a period of 3 years in the ratio 50:30:20 percent of cost consecutively.
(v) The accounting profit before tax amounted to GH₵15,000,000 for the 20X7 financial year and GH₵20,000,000 for year 20X8. These figures include non-taxable revenue of GH₵4,000,000 in year 20X7 and GH₵5,000,000 in year 20X8.
(vi) Talu Nig. Ltd had a tax loss on 31 December 20X6 of GH₵12,500,000. The tax rate for year 20X6 was 35% and 30% for each of years 20X7 and 20X8.

Required:

(a) In accordance with IAS 12 on Income Taxes, differentiate between current tax and deferred tax.

(b). Prepare the deferred tax account for the year ended 31 December 20X8.

Answer

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Tags: Deferred Tax, IAS 12, Plant and Machinery, Tax Accounting, Tax Losses
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

Question

On 30 June 20X3 Francisca Ltd had a credit balance on its deferred tax account of GH¢1,340,600 all in respect of the difference between depreciation and capital allowances.

During the year ended 30 June 20X4 the following transactions took place.

(1) GH¢45 million was charged against profit in respect of depreciation. The tax computation showed capital allowances of GH¢50 million.

(2) Interest receivable of GH¢50,000 was reflected in profit for the period. However, only GH¢45,000 of interest was actually received during the year. Interest is not taxed until it is received.

(3) Interest payable of GH¢32,000 was treated as an expense for the period. However, only GH¢28,000 of interest was actually paid during the year. Interest is not an allowable expense for tax purposes until it is paid.

(4) During the year Francisca Ltd incurred development costs of GH¢500,600, which it has capitalised. Development costs are an allowable expense for tax purposes in the period in which they are paid.

(5) Land and buildings with a carrying amount of GH¢4,900,500 were revalued to GH¢6 million.

The tax rate is 30%. Francisca Ltd has a right of offset between its deferred tax liabilities and its deferred tax assets.

Required

Calculate the deferred tax liability on 30 June 20X4. Show where the increase or decrease in the liability in the year would be charged or credited.

Answer

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Tags: Deferred Tax, Development Costs, Financial Position, IAS 12, Interest Payable, Interest Receivable, Revaluation, Tax Computation, Temporary Differences
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q50 – Corporate Reporting and Compliance

Calculate Sheen Ltd's corporate income tax liability for the year ended 31 December 20X6.

Question

Continuing from the previous year. The following information is relevant for the year ended 31st December 20X6.
(a) Interest payable/Interest receivable
Sheen Ltd still has GH₵25,000 of 8% convertible loan stock in issue and still retains its holding in the debentures purchased in 20X5.
(b) Provision for warranty
During the year Sheen Ltd had paid out GH₵500 in warranty claims and provided for a further GH₵2,000.
(d) Development costs
During 20X6 Sheen Ltd has capitalised development expenditure of GH₵17,800 in accordance with the provisions of IAS 38. Assume that tax relief on this expenditure is taken in full in the period in which it is incurred.
(e) Further information
Profit before taxation
Depreciation charged
Tax allowable depreciation
175,000
18,500
24,700
(f) Entertainment
Sheen Ltd paid for a large office party during 20X6 to celebrate a successful first two years of the business. This cost GH₵20,000. Assume that this expenditure is not tax deductible.
Tax is chargeable at a rate of 30%.

Required
(a) Calculate the corporate income tax liability for the year ended 31st December 20X6.

(b) Calculate the deferred tax balance that is required in the statement of financial position as at 31st December 20X6.

(c) Prepare a note showing the movement on the deferred tax account and thus calculate the deferred tax charge for the year ended 31st December 20X6.

(d) Prepare the statement of profit or loss note which shows the compilation of the tax expense for the year ended 31st December 20X6.

(e) Prepare a note to reconcile the product of the accounting profit and the tax rate to the tax expense for year ended 31st December 20X6.

Answer

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Tags: Financial Reporting, IAS 12, Tax Expense, Tax Reconciliation
Level: Level 2

Topic: Corporate Reporting and Compliance

Tag (SQ): IAS 12

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FR – L2 – Q53 – Financial Reporting Standards

Differentiate between current tax and deferred tax per IAS 12 for Talu Ghana Limited.

FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

FR – L2 – Q50 – Corporate Reporting and Compliance

Calculate Sheen Ltd's corporate income tax liability for the year ended 31 December 20X6.

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FR – L2 – Q53 – Financial Reporting Standards

Differentiate between current tax and deferred tax per IAS 12 for Talu Ghana Limited.

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FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

You're reporting an error for "FR – L2 – Q52 – Financial Reporting Standards and Their Applications"

FR – L2 – Q50 – Corporate Reporting and Compliance

Calculate Sheen Ltd's corporate income tax liability for the year ended 31 December 20X6.

You're reporting an error for "FR – L2 – Q50 – Corporate Reporting and Compliance"

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