Link with IAS 12: current and deferred tax

Learning objectives

• Distinguish the IAS 34 estimate of the annual effective rate (allocation of the expense across periods) from the recognition of current and deferred tax under IAS 12.L3

Normative references

• IAS 34 §30Illustrations of the same-criteria principle: (a) inventory write-downs, restructurings and impairments follow the same principles as at year-end, and a change in estimate in a later interim period results in an additional charge or a reversal; (b) a cost that does not meet the definition of an asset at the end of the interim period is not deferred in the statement of financial position, either to await future information or to smooth earnings; (c) the income tax expense of each interim period is based on the best estimate of the weighted average annual income tax rate expected for the full financial year, and amounts already recognised are adjusted if that estimate changes.
• IAS 34 §B12Interim period income tax expense is accrued at the rate that would apply to expected total annual earnings: the estimated average annual effective income tax rate, applied to the pre-tax income of the interim period.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• At 30 June, the finance director of Delmar SA proposes to calculate the deferred tax of the half-year at the estimated annual effective rate of 27%, "since IAS 34 provides for this rate". What is the relationship between the estimate of the annual effective tax rate provided for by IAS 34 and the rules of IAS 12?L3