IAS 12Chapter 1Lesson 1
Objective and scope: what an income tax is
Step 1 of 8Learning objectives
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IAS 12 deals with taxes based on taxable profits, including withholding taxes payable by a subsidiary, associate or joint arrangement on its distributions. Its central question: recognising today the current and future tax consequences of what is in the statement of financial position and of the transactions of the period. Government grants and investment tax credits follow other rules, but the temporary differences they create stay within IAS 12; Pillar Two taxes are within scope, with a mandatory exception for deferred tax.
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Learning objectives
- Explain the central question of IAS 12: the current and future tax consequences of carrying amounts and of the transactions of the period.
- Recognise an income tax, including a withholding tax on the distributions of a subsidiary.
- Separate the treatment of a grant or an investment tax credit (outside IAS 12) from the temporary differences they create (within IAS 12).
- Place Pillar Two taxes within the scope of IAS 12 and identify the exception that applies to them.