- 12 Marks
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.
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