Deferred Taxation

Introduction
The Malaysian Accounting Standards Board has issued MFRS 112, Income Taxes and is effective for financial statements covering periods beginning on or after 1 January 2012.

The Standards prescribed in MFRS 112 are based on the standards of International Accounting Standards (IAS) 112 (revised), Income Taxes, which focuses on the temporary differences between carrying amounts of assets and liabilities in the balance sheet and their corresponding tax bases. With limited exceptions, the Standard requires full provision of deferred taxes for all temporary differences. The amendments to IAS 12 requires that for an investment property measured at fair value, the measurement of the deferred tax liability is based on a rebuttable presumption that the property would be recovered by sale at the end of the reporting period.

The practical methodology introduced in this workshop will help you come to terms with MFRS 112.

Course Outline

• Introduction to Deferred Taxation
– The historical background to tax effect accounting
– The new approach: The Balance Sheet Liability Method
– MFRS 112, Income Taxes: Summary of changes made to the original IAS 12

• Timing differences versus Permanent differences
– The computation of current tax
– The Dual-computation technique

• The balance Sheet Liability Method
– The temporary difference approach

»  Recognition of deferred tax liabilities and deferred tax assets
»  Exceptions to the initial recognition differences
»  Steps in deferred tax computation

– Cases on the proof of Deferred Taxation
-  Cases on the tax effects of hire purchase and leased assets

• Unused Tax Losses and Unused Tax Credits
–  To explain and illustrate the recognition of deferred tax assets from unused tax losses and unused tax credits

• Measurement of Deferred Taxes
– To explain the measurement principles of deferred taxation

»  To explain and illustrate measurement based on expected manner of recovery either through use or by disposal
»  To illustrate the measurement of deferred tax for SMC when scaled rates apply

• Tax Effects of Non-current Assets classified as held for sale
– To explain the accounting requirements of MFRS 5
– To explain the tax treatments of non-current assets classified as held for sale
– To explain the related tax effects

• Tax effects of Items Recognised Outside Profit or Loss
– To explain the tax effect requirements for assets carried at revalued amounts

• Tax effects of Investment Properties
– IP measured on Cost Model
– IP measured on Fair Value Model

• Tax effects of compound financial instruments
– RCULS and ICULS

• Tax effects Arising in Business Combinations
– To deal with tax effects of acquisition of land-based companies
– To deal with tax effects of fair value adjustments in a business combination
– To deal with tax losses of an acquiree  in a business combination

• Tax effects of Tax Incentives
– To deal with tax effects of pioneer status
– To deal with tax effect of reinvestment allowances, ITA and IAA
– To deal with other tax incentives, such as export promotions and double deductions
 

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