Understanding Australian Accounting Standards 3E - Loftus - SMch07_sm_loftus

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1、SolutionsManualtoaccompanyUnderstandingAustralianAccountingStandardsJaniceLoftus,KenLeo,RuthPicker,VictoriaWise,KerryClarkByKenLeoJohnWiley&SonsAustralia,Ltd20137.49©JohnWileyandSonsAustralia,Ltd2013Chapter:7IncomeTaxesChapter7:IncometaxesDiscussionquestions1.Whatarethemainprincipleoftax-eff

2、ectaccountingasoutlinedinAASB112?AstheobjectiveparagraphofAASB112pointsout,‘theprincipalissueinaccountingforincometaxesishowtoaccountforthecurrentandfuturetaxconsequencesof:(a)thefuturerecovery(settlement)ofthecarryingamountofassets(liabilities)thatarerecognisedinanenterprise’sstatementoffin

3、ancialposition;and(b)transactionsandothereventsofthecurrentperiodthatarerecognisedinanenterprise’sfinancialstatements.AASB112adoptsthephilosophythat,asageneralrule,thetaxconsequencesoftransactionsthatoccurduringaperiodshouldbe‘recognisedasincomeoranexpenseinthenetprofitorlossfortheperiod’irr

4、espectiveofwhenthosetaxeffectswilloccur.Atransactionmayhavetwotax‘effects’:1.Taxpayableonprofitearnedfortheyearmaybereducedorincreasedbecausethetransactionisnottaxableordeductibleinthecurrentyear.2.Futuretaxpayablemaybereducedorincreasedwhenthattransactionbecomestaxableordeductible.Ifonlycur

5、renttaxpayableisrecordedasanexpensetheprofitforthecurrentyearisunderstatedoroverstatedbytheamountoftax(benefit)tobepaidorreceivedinfutureyears.Similarly,intheyearsthatthetaxorbenefitonthesetransactionsispaidorreceivedincometaxexpensewillincludeamountsrelatingtopriorperiodsandthereforebeunder

6、statedoroverstated.Toillustrate,consideranentitywithaccruedinterestof$12000atbalancedate.Assumingaccruedinterestisdeductibleonlywhenpaid,taxableprofitwillbe$12000greaterthanaccountingprofit,resultingin$3600extrataxbeingpaid(assuminga30%taxrate).Inthenextaccountingperiod,thetaxdeductionforint

7、erestpaidresultsinataxableprofitthatis$12000lowerthantheaccountingprofit.Thistaxbenefitreducesthecurrenttaxexpenseby$3600althoughthetransactionoccurredintheprioryear.Toensurethatthetaxeffect(expenseorbenefit)ofatransactionisrecordedintheappropriate