CERTYNEX IFRS ACADEMY

Velquerin, established in a fictitious country, pays a 'contribution to the regional development fund'. Under the law (case data), this contribution is a percentage of the taxable profit determined for the tax on profits, after the same add-backs and deductions. The accounting department classifies it as an operating expense because it 'is not corporation tax'. Which analysis should be adopted?

The classification is correct: only the main national tax on profits falls under IAS 12.

The contribution is an income tax within IAS 12, because it is based on taxable profit.

The contribution falls under IAS 12 only if it is paid to the same tax authority as the main tax on profits.

The contribution is outside IAS 12 because it funds a regional fund, not the state budget.