Finance:IAS 12

IAS 12: Income Taxes is part of the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). IAS 12 sets the accounting treatment of all taxable profits and losses, both national and foreign.

History

Timeline of IAS 12:

Date	Development
April 1978	Exposure Draft E13 Accounting for Taxes on Income published
July 1979	IAS 12 Accounting for Taxes on Income issued
January 1989	Exposure Draft E33 Accounting for Taxes on Income published
January 1994	IAS 12 (1979) was reformatted
October 1994	Exposure Draft E49 Income Taxes published
October 1996	IAS 12 Income Taxes issued
October 2000	Limited Revisions to IAS 12 published (tax consequences of dividends)
March 2009	Exposure Draft ED/2009/2 Income Tax published
September 2010	Exposure Draft ED/2010/11 Deferred Tax: Recovery of Underlying Assets (Proposed amendments to IAS 12) published
December 2010	Amended by Deferred Tax: Recovery of Underlying Assets
January 2016	Amended by Recognition of Deferred Tax Assets for Unrealised Losses

Content

The taxable amount a company is liable for is composed of its tax base multiplied with the relevant tax rate in its country of settlement. The tax base for a company will in general be the final amount reported in the statement of profit or loss plus or minus any comprehensive income or loss. There are however situations where the accounting profit may differ from the taxable profit. This difference that arises most likely needs to be settled in a future period. Therefore the difference needs to be recognised on the balance sheet as a tax asset or liability. A tax asset is only recognisable to the extent that is likely to be recovered in the future, where a tax liability always needs to be recognised in full.

Disclosure Requirements (IAS 12)

IAS 12 requires disclosures that explain the relationship between tax expense (income) and accounting profit, and the nature of the deferred tax assets and liabilities recognized.

Paragraph	Category	Disclosure Requirement	Description / Examples
IAS 12.79	Tax Components	Major Components of Tax Expense	A separate list of the major components of tax expense (e.g., current tax, adjustments for prior periods, and deferred tax).
IAS 12.81(ab)	Equity & OCI	Items Charged Outside P&L	The amount of income tax relating to each component of other comprehensive income (OCI) and items charged directly to equity.
IAS 12.81(c)	Reconciliation	Tax Reconciliation	An explanation of the relationship between tax expense and accounting profit (either a numerical reconciliation of tax rates or a reconciliation of absolute currency amounts).
IAS 12.81(d)		Changes in Tax Rates	An explanation of changes in the applicable tax rate(s) compared to the previous accounting period.
IAS 12.81(g)	Deferred Taxes	Nature of Temporary Differences	For each type of temporary difference, the amount of deferred tax recognized in the balance sheet and the amount of the change recognized in the P&L.
IAS 12.81(f)		Unrecognized Deferred Taxes	The amount of deductible temporary differences and unused tax losses for which no deferred tax asset is recognized in the balance sheet.
IAS 12.81(i)	Dividends	Consequences of Dividends	The income tax consequences of dividends to shareholders that were proposed or declared before the financial statements were authorised for issue.
IAS 12.82	Recognition Judgment	Evidence for Recognition	The nature of evidence supporting the recognition of a deferred tax asset when the entity has suffered a loss in either the current or preceding period.