Version 1: 2016
NZ IAS 12: INCOME TAXES Effective Periods Beginning
1 January 2012
See also: NZ SIC 25: Income Taxes – Changes in the Tax Status of an Entity or its Shareholders
Although every effort is made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date
it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice
DEFINITIONS
Temporary difference: Is the difference between the carrying amount of an asset/liability and its tax base.
Tax base of an asset Tax base of a liability Tax base of Income received in advance
• Is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to • Is its carrying amount, • Is its carrying amount,
the entity when it recovers the carrying amount of the asset. • Less any amount that will be deductible for tax purposes • Less any revenue that will not be taxable in the
• If those economic benefits will not be taxable, the tax base of the asset is equal to its carrying amount. in respect of the liability in future periods. future.
TEMPORARY DIFFERENCES DEFERRED TAX
Taxable temporary differences will result in Deferred tax liabilities Deferred tax assets
taxable amounts in future when the carrying Recognise liabilities for all taxable temporary Recognise for deductible temporary differences, unused tax losses, unused tax credits to the extent that taxable
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amount is recovered/liability settled. differences, except to the extent it arises from: profit will be available against which the asset can be used, except to the extent it arises from:
Deductible temporary differences will result in • Initial recognition of goodwill. • The initial recognition of an asset/liability, other than in a business combination, which does not affect
deductible amounts in future when the carrying accounting/tax profit.
amount is recovered/liability settled. • Initial recognition of an asset/liability that does
after a thorough examination of the particular facts and circumstances of the situation.
not affect accounting or tax profit and the Recognise for deductable temporary differences arising from investments in subsidiaries and associates to the extent
transaction is not a business combination. it is probable the temporary difference will reverse in the foreseeable future and there will be available tax profit
• Liabilities from undistributed profits from to be utilised.
investments in subsidiaries, branches and A deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent
associates, and interests in joint ventures where that it is probable that future taxable profits will be available (i.e. the entity has sufficient taxable temporary
company can control the timing of the reversal. differences or there is convincing other evidence that sufficient taxable profits will be available against which the
CURRENT TAX unused tax losses or unused tax credits can be utilised).
• Recognise liability for unsettled portion of tax
expense.
DEFERRED TAX - MEASUREMENT
• Recognise an asset to the extent amounts paid
exceed amounts due. • Measure the balance at tax rates that are expected to apply in the period in which the asset is realised or liability settled based on tax rates that have been enacted or
• Tax loss which can be used against future taxable substantively enacted by the end of the reporting period.
income can be recognised as an asset (deferred • Deferred tax assets and liabilities are not discounted.
tax asset). • The applicable tax rate depends on how the carrying amount of an asset or liability is recovered or settled.
• Current and deferred tax shall be recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from a
transaction or event which is recognised, in the same or a different period, directly in equity or other comprehensive income, or a business combination.
CURRENT TAX MEASUREMENT
• Current tax and deferred tax are charged or credited directly to equity or other comprehensive income if the tax relates to items that are credited or charged, in the
Measure the asset/liability using the tax rates that same or a different period, directly to equity or other comprehensive income.
are enacted or substantively enacted at the
reporting date. REBUTTABLE PRESUMPTION – FOR INVESTMENT PROPERTY AT FAIR VALUE UNDER NZ IAS 40
Presumption - For investment properties at fair value, deferred tax is calculated assuming the recovery of the carrying amount of the investment property, will ultimately
be entirely through sale, regardless of whether this is actually managements’ intention or not.
TIER 2 NZ IFRS RDR REPORTERS
Presumption is rebutted and the carrying amount will ultimately be recovered “through use” over the life of the asset rather than sale:
NZ IFRS RDR Reporters must comply fully with the • If the asset is “depreciable”; and
recognition and measurement principles of NZ IAS • The asset is held in order to consume all of the assets benefits over the life of the asset (i.e. collecting rental income until the property “falls over”).
12. However, there are certain disclosure
exemptions available. Land – Land is not depreciable and therefore the recovery of Land is always through sale.
