(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009Section 29Income TaxScope of this section29.1 For the purpose of this IFRS, income tax includes all domestic and foreign taxesthat are based on taxable profit. Income tax also includes taxes, such aswithholding taxes, that are payable by a subsidiary, associate or joint venture ondistributions to the reporting entity.29.2 This section covers accounting for income tax. It requires an entity to recognisethe current and future tax consequences of transactions and other events thathave been recognised in the financial statements. These recognised tax amountscomprise current tax and deferred tax. Current tax is tax payable (refundable) inrespect of the taxable profit (tax loss) for the current period or past periods.Deferred tax is tax payable or recoverable in future periods, generally as a resultof the entity recovering or settling its assets and liabilities for their currentcarrying amount, and the tax effect of the carryforward of currently unused taxlosses and tax credits.Steps in accounting for income tax29.3 An entity shall account for income tax by following the steps (a)–(i) below:(a)(b)(c)recognise current tax, measured at an amount that includes the effectof the possible outcomes of a review by the tax authorities (paragraphs29.4–29.8).identify which assets and liabilities would be expected to affect taxableprofit if they were recovered or settled for their present carrying amounts(paragraphs 29.9 and 29.10).determine the tax basis of the following at the end of the reporting period:(i)(ii)the assets and liabilities in (b). The tax basis of assets and liabilities isdetermined by the consequences of the sale of the assets orsettlement of liabilities for their present carrying amounts(paragraphs 29.11 and 29.12).other items that have a tax basis although they are not recognised asassets or liabilities, ie items recognised as income or expense that willbecome taxable or tax-deductible in future periods (paragraph 29.13).(d)(e)(f)compute any temporary differences, unused tax losses and unused taxcredits (paragraph 29.14).recognise deferred tax assets and deferred tax liabilities arising from thetemporary differences, unused tax losses and unused tax credits(paragraphs 29.15–29.17).measure deferred tax assets and liabilities at an amount that includes theeffect of the possible outcomes of a review by the tax authorities using taxrates that, on the basis of enacted or substantively enacted tax law at the© IASCF 177