PAS 12

• The varying treatments of economic activities between the PFRSs and tax laws result to permanent and temporary differences.
• Permanent differences are those that do not have future tax consequences.
• Temporary differences are either taxable temporary differences or deductible temporary differences.
• Taxable temporary differences arise, for example, when financial income is greater than taxable income or the carrying amount of an asset is greater than its tax base. Deductible temporary differences arise in case of the opposites of the foregoing.
• Taxable temporary differences result to deferred tax liabilities while deductible temporary differences result to deferred tax assets.
• If the increase in deferred tax liability exceeds the increase in deferred tax asset, the difference is deferred tax expense. If it is the opposite, the difference is deferred tax income or benefit.
• Income tax expense (benefit) is computed using PFRSs. It comprises current tax expense and deferred tax expense (income or benefit).
• Current tax expense is computed using tax laws.
• A deferred tax asset is recognized only to the extent that it is realizable.
• Deferred taxes are measured using enacted or substantially enacted tax rates that are applicable to the periods of their expected reversals.
• Deferred tax assets and liabilities are not discounted.
• In the statement of financial position, current tax assets and liabilities are presented separately as current items while deferred tax assets and liabilities are presented separately as noncurrent items.
• Tax consequences are recognized either in profit or loss, other comprehensive income, or directly in equity depending on the accounting treatment of the related transaction or event.