IAS 12Chapter 2Lesson 1
The vocabulary of IAS 12: accounting profit, taxable profit, current tax and deferred tax
Step 1 of 9Learning objectives
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Two profits coexist: accounting profit (before tax) and taxable profit, calculated under tax rules. Current tax is the tax payable on the taxable profit of the period; deferred tax reflects future taxes payable or recoverable in respect of temporary differences, losses and credits carried forward. The tax expense in profit or loss adds the two together: it is not the tax paid during the year.
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Learning objectives
- Distinguish accounting profit from taxable profit, current tax from deferred tax, tax expense from tax paid.
- Explain why tax expense comprises current tax and deferred tax.
- Calculate the total tax expense from current tax and the deferred tax recognised in profit or loss.
- Recognise a temporary difference and distinguish it from a gap that will never reverse.