PAS 12 ACCOUNTING FOR INCOME TAX
ACCOUNTING INCOME TAXABLE INCOME
financial income before deducting income income for the period in accordance with rules
tax expense established by taxation authorities
Permanent Difference
items of revenue and expenses included in either accounting or taxable income but not both
Non-taxable Income
Non-deductible expense
do not give rise to either deferred tax assets or liability
Temporary Differences
difference between the carrying amount of an asset or liability and its tax base (balance sheet method)
include timing differences
give rise to either deferred tax asset or liability
Timing Differences
differences between accounting income and taxable income that originate in one period and reverse in one or more sub
Deferred Tax Liability
the amount of income tax payable in future periods with respect to taxable temporary difference
arises from:
Accounting Income > Taxable Income; due to timing difference
Carrying Amount of Asset > Tax Base
Carrying Amount of Liability < Tax Base
Tax Base - amount attributable to asset for tax purposes
shall be recognized for all taxable temporary differences, except from:
goodwill resulting from business combination and which is non-deductible for tax purposes
initial recognition of an asset or liability in a transaction that is not a business combination and affects neither acco
undistributed profits of subsidiary, associate or joint venture when:
the parent, investor or venturer is able to control the timing of the reversal of the temporary differences
it is probable that the temporay difference will not revers in the foreseeable future
temporary differences that technically are not timing differences but nevertheless give rise to deferred tax liability
Asset revalued upward (revaluation surplus), and no equivalent adjuatment for tax purposes
The carrying amount of the investment in subsidiary, associate or joint venture > tax base due from the undistribut
cost of business combination accounted for as an acquisition and allocated to FV of identifiable assets and liabilities
Deferred Tax Assets
amount of income tax recoverable in future periods with respect to deductible temporay difference and operating loss c
arises from:
Taxable Income > Accounting Income; due to timing differences
Tax Base of Asset > Carrying Amount
Tax Base of Liability < Carrying Amount
temporary difference that technically are not timing difference but nevertheless give rise to deferred tax assets:
Asset revalued downward (impairment loss) and no equivalent adjustment for tax purposes
Tax base of investment in subsidiary, associate or joint venture > Carrying Amount; due from continuing losses in th
Financial Asset carried at FV < Cost but no equivalent adjustment for tax purposes
shall be recognized for all deductible temporary differences and NOLCO when its probable that taxable income will be av
Measurement
Current Tax Liability and Current Tax Asset (Taxable Income/Loss X Current Tax Rate)
measured using the tax rate that has been enacted and effective at the end of the period.
Deferred Tax Asset and Deferred Tax Liability (Deductible/(Taxable) Temporary Difference X Applicable Tax
measured using the tax rate that has been enacted by the end of the reporting period and expected to apply the pe
Income Tax Expense = Current Tax Expense + Deferred Tax Liability - Deferred Tax Asset/Benefits
Presentation
Both non-current regardless of reversal and offsetting is not allowed except when:
levied by the same authority
has legal enforceable right to offset a current tax liability againts the current tax asset
d reverse in one or more subsequent period
tion and affects neither accounting income nor taxable income
e temporary differences
o deferred tax liability
ase due from the undistributed income.
ntifiable assets and liabilities and no equivalent adjustment is made for tax purposes.
fference and operating loss carry forward (NOLCO).
deferred tax assets:
e from continuing losses in the current and prior years.
hat taxable income will be available against which the deferred tax asset can be used.
Income Tax Expense
Income Tax Payable
Difference X Applicable Tax Rate
and expected to apply the period when the asset is realized or the liability is settled.
Asset = Liabilities + SHE
Cap + RE
Rev - Exp
+ +
+
+
+ +
Land DTL RS
100000 25000 75000
2024 2025 2026 2027
Income Before Depreciation and Tax 6,000,000.00 6,000,000.00 6,000,000.00 6,000,000.00
Depreciation 250,000.00 250,000.00 250,000.00 250,000.00
Income before Tax 5,750,000.00 5,750,000.00 5,750,000.00 5,750,000.00
Excess Depreciation - 150,000.00 - 50,000.00 50,000.00 150,000.00
Taxable Income 5,600,000.00 5,700,000.00 5,800,000.00 5,900,000.00
25% 25% 25% 25%
Current Tax Expense 1,400,000.00 1,425,000.00 1,450,000.00 1,475,000.00
Deferred Tax Liability - 37,500.00 - 12,500.00 12,500.00 37,500.00
16-5 2024 2025 2026 2027
Income before tax 2,000,000.00 3,000,000.00 4,000,000.00 5,000,000.00
Doubtful Accounts 100,000.00 - 100,000.00
Unearned Rent Income 120,000.00 - 40,000.00 - 40,000.00 - 40,000.00
Warranty Expense 300,000.00 - 20,000.00 - 80,000.00 - 200,000.00
Taxable Income 2,520,000.00 2,840,000.00 3,880,000.00 4,760,000.00
25% 25% 25% 25%
630,000.00 710,000.00 970,000.00 1,190,000.00
Deferred Tax Asset 130,000.00 - 40,000.00 - 30,000.00 - 60,000.00
Selena Company reported the following for the year ended December 31, 2024:
Accounting Income 8,000,000.00
Non-deductible Expense 450,000.00
Non-taxable revenue 360,000.00
Doubtful Accounts 125,000.00
Estimated warranty expense that had been
recognized as expense in 2024 when the
product are sold but is deductible for tax 265,000.00
purposes when paid
Accounting Depreciation 800,000.00
Tax Depreciation 600,000.00
Gross income on installment sales included in 175,000.00
accounting income but taxable only in 2025 25%
Income Tax Rate
Income Tax Expense/ Current Tax Expense
Compute for the following:
1 Taxable income 8,505,000.00
2 Net Income 5,977,500.00
3 Current Tax Expense 2,126,250.00
4 Deferred Tax Asset and or Deferred Tax Liability
Accounting Income 8,000,000.00
Permanent Differences
Non-deductible Expense 450,000.00
Non-taxable revenue - 360,000.00 90,000.00
Accounting Income Subject to Tax 8,090,000.00 25%
Deductible temporay differences
Doubtful Accounts 125,000.00
Excess Warranty Expense 265,000.00
Excess Accounting depreciation 200,000.00 590,000.00
Taxable temporay differences
Gross income on installment sale - 175,000.00
Taxable Income 8,505,000.00
Current Tax Expense 25% X 8,505,000.00 2,126,250.00
Deferred Tax Asset 25% X 590,000.00 147,500.00
Deferred Tax Liability 25% X 175,000.00 43,750.00
Income Tax Expense 2,022,500.00
Accounting Taxable
8,000,000.00 8,000,000.00
450,000.00 450,000.00
- 360,000.00 - 360,000.00
125,000.00
265,000.00
200,000.00
- 175,000.00
8,090,000.00 8,505,000.00
25% 25%
2,022,500.00 2,126,250.00
5,977,500.00
8,000,000.00
2,126,250.00
43,750.00
- 147,500.00 2,022,500.00
5,977,500.00
16-1
Income Tax Expense 1,750,000.00 2,000,000.00
Income Tax Payable 1,750,000.00
Deferred Tax Asset 250,000.00
Income Tax Expense 250,000.00
Income Tax Expense 250,000.00
Deferred Tax Asset/(Liability - if not the same item)
Income before Income 6,000,000.00
Income Tax Expense
Current Tax Expense 1,750,000.00 2,000,000.00
Deferred Tax Benefit - 250,000.00 1,500,000.00 250,000.00
Net Income 4,500,000.00
16-3
Financial Income before 7,900,000.00
Excess Tax Depreciation - 1,000,000.00
Litigation Loss 400,000.00
Excess Warranty Expense 300,000.00
Taxable Income 7,600,000.00
25%
Current Tax expense 1,900,000.00
Income Tax Expense 1,900,000.00
Income Tax Payable 1,900,000.00
Income Tax Expense 250,000.00
Deferred Liability 250,000.00
Deferred Tax Asset 175,000.00
Income Tax Expense 175,000.00
Financial Tax
6,000,000.00 6,000,000.00
- 50,000.00 td
- 60,000.00 td
90,000.00 90,000.00 pd
10,000.00 10,000.00 pd
6,100,000.00 5,990,000.00
1,525,000.00 1,497,500.00
Financial Tax
6,000,000.00 6,000,000.00
100,000.00 td
- 500,000.00 td
- 250,000.00 - 250,000.00 pd
150,000.00 150,000.00 pd
200,000.00 td
800,000.00 td
5,900,000.00 6,500,000.00
1,475,000.00 1,625,000.00
9,700,000.00 9,700,000.00
- 350,000.00 - 350,000.00
- 500,000.00 - 500,000.00
150,000.00
9,350,000.00 9,000,000.00 - 500,000.00
2,337,500.00 2,250,000.00 - 125,000.00
- 75,000.00
- 200,000.00
1,650,000.00
1,637,500.00
62,500.00
25,000.00
2,000,000.00
250,000.00
9,000,000.00
2,250,000.00
6,750,000.00
