|
LEMBAGA PIAWAIAN PERAKAUNAN MALAYSIA
MALAYSIAN ACCOUNTING STANDARDS BOARD
Income Taxes The standards, which have been set in the bold type, should be read in the context of the background material and implementation guidance in this Standard, and in the context of the Foreword to Financial Reporting Standards. Financial Reporting Standards are not intended to apply to immaterial items. Objective The objective of this Standard is to prescribe the accounting treatment for income taxes. The principal issue in accounting for income taxes is how to account for the current and future tax consequences of: the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognised in an enterprise's balance sheet; and transactions and other events of the current period that are recognised in an enterprise's financial statements.
It is inherent in the recognition of an asset or liability that the reporting enterprise expects to recover or settle the carrying amount of that asset or liability. If it is probable that recovery or settlement of that carrying amount will make future tax payments larger (smaller) than they would be if such recovery or settlement were to have no tax consequences, this Standard requires an enterprise to recognise a deferred tax liability (deferred tax asset), with certain limited exceptions. This Standard requires an enterprise to account for the tax consequences of transactions and other events in the same way that it accounts for the transactions and other events themselves. Thus, for transactions and other events recognised in the income statement, any related tax effects are also recognised in the income statement. For transactions and other events recognised directly in equity, any related tax effects are also recognised directly in equity. Similarly, the recognition of deferred tax assets and liabilities in a business combination affects the amount of goodwill or negative goodwill arising in that business combination. This Standard also deals with the recognition of deferred tax assets arising from unused tax losses or unused tax credits, the presentation of income taxes in the financial statements and the disclosure of information relating to income taxes. Scope This Standard should be applied in accounting for income taxes. This Standard supersedes MASB Approved Accounting Standard, IAS 12, Accounting for Taxes on Income. For the purposes of this Standard, income taxes include all domestic and foreign taxes which are based on taxable profits. Income taxes also include other taxes, such as withholding taxes, which are payable by a foreign subsidiary, associate or joint venture on distributions to the reporting enterprise, and real property gains taxes payable on disposal of properties. This Standard does not deal with the methods of accounting for government grants or investment tax credits. However, this Standard does deal with the accounting for temporary differences that may arise from such grants or investment tax credits.
Definitions The following terms are used in this Standard with the meanings specified:
Accounting profit is net profit or loss for a period before deducting tax expense. Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period.
Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: deductible temporary differences; the carry forward of unused tax losses; and the carry forward of unused tax credits.
Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
Tax expense (tax income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current tax and deferred tax. Taxable profit (tax loss) is the profit (loss) for a period, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable (recoverable). Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Temporary differences may be either: taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.
The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense (deferred tax income).
|
Our Standards 
