Question 3a ii
A deferred tax liability is the amount of income tax payable in respect of taxable temporary differences. A deferred tax asset is the amount of income tax recoverable in future periods in respect of deductible temporary differences.
A temporary difference is the difference between the carrying amount of an asset or liability in the statement of financial position and its tax base.
Required:
(ii) Define the tax base of a liability as outlined in IAS 12. Use your definition to compute the tax base of the following liabilities:
– $120,000 is included in trade payables. This amount relates to purchases which qualified for a tax deduction when the purchase was made.
– $40,000 is included in accrued liabilities. A tax deduction relating to this liability will be given when the liability is settled. (4 marks)