income tax points

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  1. HkAS 12 temporary difference: a difference between the carrying amount of an asset or liability in the statement of financial position and its tax base
  2. Difference in recog of DTL and DTA
    • Deferred tax liability should be recognized for all taxable temporary difference
    • deferred tax asset should be recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences will be utilized
    • Carrying amount of deferred tax asset should be at the end of each reporting period.
    • reduce the carry amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available
  3. No deferred tax assets or liabilities should be recognized:
    • Initial recognition of Goodwill
    • initial recognition of asset or liability that is not in a business combination and affect neither accounting profit nor taxable profit(eg. Dr PPE Cr cash)
  4. Related to amount of DT
    • Tax rate is based on the rate that has been enacted or substantively enacted by the end of the report period
    • no discounting is allowed for the deferred tax
  5. Deferred tax outside profit and loss - example
    • Dr PPE Cr revaluation Surplus
    • Tax: Dr revaluation Surplus Cr DTL
  6. Manner of recovery
    • Measurement of deferred tax liability and deferred tax asset should reflect the tax consequences that would follow from the manner in which the entity expect at the end of the RP to recover or settled the carrying amount of the asset and liability
    • For example, depends on how you use the machine relevant tax rate applies
  7. Manner of recovery - non-deppreciable assets
    non-deppreciable assets using the revaluation model per AS 16 should reflect its tax consequence of recovering the carrying amount of the Non depreciable assets through sale, tax rate about sale will apply
  8. Manner of recovery -IP@FV
    • Investment properties at fair value - rebutable presumption IP will be recovered through sale, tax consequence reflect the recovery through sale
    • Rebutted if depreciable and objective is to consume and benefits over time
  9. unused tax losses
    • Deferred tax asset is recognized for unused tax losses to the extent that it is probable that future taxable profit will be available
    • If it is not probable that Taxable profit will be available deferred tax asset is not recognized
  10. Undistributed profits related to investments in subsidiaries- if the subsidiary has been undistributed profits the parent in the future will receive dividends from subsidiary and incur income tax. Deferred tax liability is not recognized when both conditions satisfied.
    • 1. parent is able to control the timing of the Reversal of the temporary difference
    • is probable that the Temporary difference will not reverse and the foreseeable future,
    • ie
    • 1.Parents can control dividend policy of investee
    • 2. parents does not plan to ask for dividends from investee soon
    • *No control over associate >recognize deferred tax liability
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income tax points
2016-12-19 12:00:42
income tax points

income tax points
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