The reconciliation between tax expense and accounting profit

The entity explains the relationship between its tax expense and its accounting profit through a numerical reconciliation: between tax expense and accounting profit multiplied by the applicable rate (or between the average effective rate and the applicable rate), disclosing the basis on which that rate is computed and its changes. The applicable rate is the one that provides the most meaningful information, often the domestic rate of the head office country. The reconciliation shows unusual or lasting factors: exempt income, non-deductible expenses, unrecognised losses, foreign rates, prior-period adjustments.

In this lesson

1. 2Understand
2. 3The IFRS rule
3. 4Why?
4. 5How to apply it
5. 6Numerical example
6. 7Key points
7. 8Exercises