Question

Need to be answered in detailed and make sure answer is correlated to Australia standards

(B) Every year companies in Australia generally expect to have to pay some of their earnings to the Australian government in the form of income tax. However, the amount paid to the government is rarely the amount ported as income tax expense in the statement of profit or loss and other comprehensive income. Required 1. Explain the objectives of accounting for income tax in general purpose financial statements. 2. List the steps in the annual computation of deferred tax assets and liabilities.

Answer 1

Answer to Question 1

The objective of accounting for income tax in general purpose financial statements are to recognize:

a) the amount of taxes payable or refundable in current year

b) deferred tax liabilities and assets for future tax calculations.

Answer to Question 2

Step 1 List the assets and liabilities in the Balance Sheet

Step 2 Calculate Tax Bases of assets and liabilities

Step 3 Calculate the temporary difference from Step 1 and Step 2

If temporary difference is negative then it would be called as Taxable Temporary Difference

If it is positive then it would be stated as Deductible Temporary Difference

Step 4 Apply Rate of Tax on Step 3

Step 5 After applying rate of tax, DTA or DTL will be calculated.

Present the same in Balance Sheet.