Q: What is the formula for calculating the temporary difference under IAS 12?

$$\text{Temporary Difference} = \text{Carrying Amount} - \text{Tax Base}$$

Q: A company revalues its fixed asset from $$100,000 to$$ $$150,000. $$The tax base remains at $$100,000. If $$the tax rate is $$20\%$$, what is the deferred tax liability arising from this revaluation?

$$\10$$,000 = (150,000 - 100,000) \times 20\%$

Q: If the carrying amount of an asset is $$80,000$$ and its tax base is $$70,000$$, with a tax rate of $$25\%$$, what is the deferred tax liability?

$$\2$$,500 = (80,000 - 70,000) \times 25\%$

Question 1

According to IAS 12, which method is used to account for income taxes in financial statements?

Accepted Answer

Asset-liability method

Question 2

What is the formula for calculating the temporary difference under IAS 12?

Accepted Answer

$$	ext{Temporary Difference} = 	ext{Carrying Amount} - 	ext{Tax Base}$$

Question 3

A company revalues its fixed asset from $$100,000 to$$ $$150,000. $$The tax base remains at $$100,000. If $$the tax rate is $$20\%$$, what is the deferred tax liability arising from this revaluation?

Accepted Answer

$$\10$$,000 = (150,000 - 100,000) 	imes 20\%$

Question 4

Which of the following is NOT a required disclosure under IAS 12?

Accepted Answer

List of all company shareholders

Question 5

When is a deferred tax asset recognized according to IAS 12?

Accepted Answer

Only if it is probable that sufficient future taxable profits will be available

Question 6

Which scenario is an exception where deferred tax is NOT recognized under IAS 12?

Accepted Answer

Initial recognition of goodwill

Question 7

If the carrying amount of an asset is $$80,000$$ and its tax base is $$70,000$$, with a tax rate of $$25\%$$, what is the deferred tax liability?

Accepted Answer

$$\2$$,500 = (80,000 - 70,000) 	imes 25\%$

Question 8

Which of the following best describes the relationship between carrying amount and tax base in the context of deferred tax?

Accepted Answer

If carrying amount equals tax base, no temporary difference exists

Question 9

A company has a deferred tax asset of $$5,000$$ and a deferred tax liability of $$8,000. $$What is the net deferred tax position reported on the balance sheet?

Accepted Answer

$$\3$$,000$ deferred tax liability

Question 10

Which of the following would most likely result in a deferred tax asset?

Accepted Answer

Accelerated tax depreciation compared to accounting depreciation

Question 11

If a company recognizes a deferred tax asset, what must it disclose according to IAS 12?

Accepted Answer

The amount, expiry date, and any usage restrictions

Question 12

Which of the following statements about deferred tax is correct?

Accepted Answer

Deferred tax is recognized in both the income statement and balance sheet

Question 13

A company has the following: carrying amount of inventory $$50,000$$, tax base $$45,000$$, tax rate $$30\%. $$What is the deferred tax liability?

Accepted Answer

$$\1$$,500 = (50,000 - 45,000) 	imes 30\%$

Question 14

Which of the following is a key purpose of the disclosure requirements under IAS 12?

Accepted Answer

To ensure transparency for financial statement users

Question 15

If an asset is revalued upwards, but the tax base does not change, what is the immediate accounting consequence under IAS 12?

Accepted Answer

A new temporary difference arises, leading to a deferred tax liability

Question 16

Which of the following is NOT a temporary difference under IAS 12?

Accepted Answer

Initial recognition of assets in a non-business combination that does not affect accounting or taxable profit

Question 17

A company has a carrying amount of $$120,000$$ for a liability, and its tax base is $$130,000. $$The tax rate is $$25\%. $$What is the deferred tax asset?

Accepted Answer

$$\2$$,500 = (130,000 - 120,000) 	imes 25\%$

Question 18

Which of the following best explains why deferred tax items are recognized?

Accepted Answer

Because temporary differences affect future tax payments

Question 19

A company has a carrying amount of $$60,000$$ for an asset, tax base $$65,000$$, tax rate $$20\%. $$What is the deferred tax asset?

Accepted Answer

$$\1$$,000 = (65,000 - 60,000) 	imes 20\%$

Question 20

Which of the following is a multi-step process required when applying IAS 12 to a new asset acquisition?

Accepted Answer

Calculate carrying amount and tax base, determine temporary difference, recognize deferred tax asset or liability, and disclose relevant information

Income Taxes (IAS 12): Deferred Tax Accounting in Financial Statements

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