IAS 12Chapter 7Lesson 1
Tax rates: enacted or substantively enacted, expected on reversal; no discounting
Step 1 of 9Learning objectives
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Current tax is measured at the rates enacted or substantively enacted at the reporting date; deferred tax at the rates expected to apply to the period when the asset is realised or the liability settled, based on those same enacted or substantively enacted rates. A government announcement may have the effect of actual enactment. With progressive rates, the expected average rate is used. A change in rates alters balances without changing the differences: the effect goes to profit or loss, except for items recognised outside profit or loss. Deferred tax assets and liabilities are never discounted.
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Learning objectives
- Determine the rate applicable to current tax and to deferred tax.
- Calculate deferred tax with staggered rates, an average rate for progressive scales and the effect of a change in rates.
- Assess whether an announced rate is substantively enacted at the reporting date.
- Explain why deferred tax assets and liabilities are not discounted.