Nr078 conceptual framework and accounting standards pas 12 income taxes

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PAS 12 Income TaxesLearning Objectives•Understand the scope and the fundamentalprinciple of PAS 12.•Interpret the terminology used in the accountingfor current and deferred taxes.•State the recognition, measurement andpresentation of current and deferred taxes.Conceptual Framework & Acctg.Standards (by: Zeus Vernon B. Millan)2Accounting profit vs. Taxable profit•The varying treatments of economic activities between the PFRSsand tax laws result to permanent and temporary differences.Conceptual Framework & Acctg.Standards (by: Zeus Vernon B. Millan)3Permanent differences•Permanent differences are those that do not have future taxconsequences.•Examples:a. Interest income on government bonds and treasury billsb. Interest income on bank depositsc. Dividend incomed. Fines, surcharges, and penalties arising from violation of lawe. Life insurance premium on employees where the entity is theirrevocable beneficiaryConceptual Framework & Acctg.Standards (by: Zeus Vernon B. Millan)4Temporary differences•Temporary differences are those that have future tax consequences.Temporary differences are either:a. Taxable temporary differences – arise, for example, whenfinancial income is greater than taxable income or the carryingamount of an asset is greater than its tax base.b. Deductible temporary differences arise in case of the opposites ofthe foregoing.•Taxable temporary differences result to deferred … Purchase document to see full attachment

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