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WorkpaperIAS 12 — Income TaxesL1 · L2 · L3

Current tax computation

4 missions13 sections to document35 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

For one taxable entity and one period, check that the levy is within IAS 12, move from accounting profit to taxable profit using the tax adjustments given by the case, apply the rate enacted or substantively enacted at the reporting date (or the graduated scale), determine the current tax balance after instalments and, where relevant, the asset arising from carrying a tax loss back, then post the entries.

13 sections · 44 blocks · 10 calculations · 4 entries

  • IAS 12 §1
  • IAS 12 §2
  • IAS 12
  • IAS 12 §4A
  • IAS 12 §5
  • IAS 12 §6
  • IAS 12 §12
  • IAS 12 §46
  • IAS 12 §48
  • IAS 12
  • IAS 12 §13
  • IAS 12 §14

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

4 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
From accounting profit to current tax: add-backs, instalments and carryback of a loss
Case tasks documented here
  • Reconcile accounting profit to taxable profit for 20X1.
  • Calculate current tax for 20X1.
  • Determine the current tax balance at 31 December 20X1 after deducting the instalments.
  • Record the 20X1 entries (instalments, tax for the year, application of the instalments).
  • Calculate the 20X2 tax loss and the asset arising from its carryback.
  • Determine the current tax position at 31 December 20X2.
  • Record the 20X2 entries (payment of the 20X1 balance, instalments, carryback).
1

Inputs

Inputs

  • Taxable entity, jurisdiction, period and nature of the levy (base, person liable)

    TextRequired

    BRUMEVAL_PROFIT_TAX_AND_REVENUE_LEVY

    Case data: the tax law, the base and the person liable are given by the case; IAS 12 sets no tax rule.

  • Reporting date

    DateRequired

    20X1-12-31

  • Accounting profit (profit for the period before tax expense)

    Number

    1,180,000

  • Accounting loss (if any, entered as a positive amount)

    Number

  • Tax add-backs of the period (non-deductible expenses, taxable income not recognised…)

    Table

    FINES · 22,000 | RECEPTION_COSTS · 18,000 | LITIGATION_PROVISION · 60,000

    Case data: each add-back comes from the tax law of the case, never from IAS 12. Positive amounts.

  • Tax deductions of the period (non-taxable income, deductions specific to the tax law…)

    Table

    EXEMPT_DIVIDENDS · 40,000

    Case data: each deduction comes from the tax law of the case. Positive amounts, subtracted by the calculation.

  • Single tax rate enacted or substantively enacted at the reporting date (%)

    Number

    25 %

    IFRS rule: rate enacted or substantively enacted at the reporting date (para. 46). Input convention: with a graduated scale, leave this rate empty and fill in the bands.

  • Tax instalments paid for the period

    Number

    276,000

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Scope

Analysis

IAS 12 §1IAS 12 §2IAS 12IAS 12 §4A

  • Points examined

    ChecklistRequired

    • Domestic or foreign tax based on taxable profits
    • Withholding tax payable by a subsidiary, associate or joint arrangement on distributions to the entity
    • Government grants and investment tax credits: accounting method outside IAS 12, temporary differences dealt with by IAS 12
    • Pillar Two income taxes: within scope, without deferred tax (mandatory exception)
4

Current tax: definitions and recognition

Analysis

IAS 12 §5IAS 12 §6IAS 12 §12

  • Points examined

    ChecklistRequired

    • Starting point: accounting profit, before tax expense
    • Taxable profit determined under the rules of the taxation authority (adjustments given by the case)
    • Unpaid current tax for current and prior periods: liability
    • Amounts paid in excess of the amount due: asset
    • Tax expense = current tax + deferred tax (deferred tax is dealt with in “Temporary differences schedule” and “Deferred tax measurement and allocation”)
5

Applicable tax rate

Analysis

IAS 12 §46IAS 12 §48

  • Points examined

    ChecklistRequired

    • Amount expected to be paid (recovered), using the tax rates and laws enacted or substantively enacted at the reporting date
    • Government announcement having the substantive effect of actual enactment: announced rate used
    • Legal scale applied as given by the case (single rate or bands)
6

Graduated scale by bands

Analysis

IAS 12 §46IAS 12

  • Taxable profit in the first band

    Number

  • Rate of the first band (%)

    Number

  • Taxable profit in the second band

    Number

  • Rate of the second band (%)

    Number

  • Taxable profit in the third band

    Number

  • Rate of the third band (%)

    Number

  • Points examined

    Checklist

    • Bands and rates taken from the enacted or substantively enacted tax law (case data)
    • Sum of the bands equal to taxable profit (unused band: 0)
    • Average rate expected to be used for deferred tax (“Deferred tax measurement and allocation”)
7

Carry-back of a tax loss

Analysis

IAS 12 §13IAS 12 §14

  • Tax loss of the period carried back (under the tax law of the case)

    Number

  • Rate of the prior period against which the loss is set off (%)

    Number

  • Previously paid tax that can be recovered (ceiling given by the case)

    Number

  • Points examined

    Checklist

    • Benefit of the carry-back recognised as an asset (recovery of prior current tax)
    • Asset recognised in the period in which the tax loss occurs
8

Taxable profit and current tax

Calculations

IAS 12 §5IAS 12 §12IAS 12 §13IAS 12 §46

  • Taxable profit (tax loss if negative)

    CalculationRequired

    1,240,000

    Accounting profit (profit for the period before tax expense) ; − Accounting loss (if any, entered as a positive amount) ; Tax add-backs of the period (non-deductible expenses, taxable income not recognised…) ; − Tax deductions of the period (non-taxable income, deductions specific to the tax law…)

    A negative result is a tax loss: no current tax for the period (enter no rate); the loss is carried back (dedicated section) or forward (“Recoverability of deferred tax assets”) under the tax law of the case.

  • Current tax at the single rate

    Calculation

    310,000

    Taxable profit (tax loss if negative) ; Single tax rate enacted or substantively enacted at the reporting date (%)

  • Tax on the first band

    Calculation

    Taxable profit in the first band ; Rate of the first band (%)

  • Tax on the second band

    Calculation

    Taxable profit in the second band ; Rate of the second band (%)

  • Tax on the third band

    Calculation

    Taxable profit in the third band ; Rate of the third band (%)

  • Current tax under the graduated scale

    Calculation

    0

    Tax on the first band ; Tax on the second band ; Tax on the third band

    Case data: bands and rates. The resulting average rate is used for deferred tax (para. 49, “Deferred tax measurement and allocation”).

  • Current tax liability (tax due and unpaid)

    Calculation

    34,000

    Current tax at the single rate ; Current tax under the graduated scale ; − Tax instalments paid for the period

    IFRS rule: unpaid part as a liability, excess paid as an asset (para. 12). The balance is determined after the instalments paid for the period.

  • Current tax asset (instalments in excess of the tax due)

    Calculation

    0

    Current tax at the single rate ; Current tax under the graduated scale ; − Tax instalments paid for the period

  • Loss carried back × prior period rate

    Calculation

    Tax loss of the period carried back (under the tax law of the case) ; Rate of the prior period against which the loss is set off (%)

  • Current tax asset arising from the carry-back

    Calculation

    Loss carried back × prior period rate ; Previously paid tax that can be recovered (ceiling given by the case)

    IFRS rule: the benefit of the carry-back is an asset (para. 13), recognised in the period of the loss (para. 14). Case data: availability, period and ceiling of the carry-back.

9

Journal entries

Entries

  • Current tax for the period (single rate)

    Entry

    AccountDebitCredit
    Current tax expense310,000
    Current tax liability310,000

  • Current tax for the period (graduated scale)

    Entry

    Debit Current tax expense ← Current tax under the graduated scale ; Credit Current tax liability ← Current tax under the graduated scale

  • Instalments paid

    Entry

    AccountDebitCredit
    Current tax asset (instalments)276,000
    Cash276,000

    Teaching assumption: instalments recognised as a current tax asset until the final assessment; at the reporting date, the net balance is presented as computed.

  • Carry-back of the tax loss

    Entry

    Debit Current tax asset (carry-back) ← Current tax asset arising from the carry-back ; Credit Current tax income ← Current tax asset arising from the carry-back

10

Scope and rate retained

Judgment

IAS 12 §1IAS 12 §2IAS 12IAS 12 §4AIAS 12 §46IAS 12 §48

  • Classification of the levy

    JudgmentRequired

    Income tax (IAS 12)

    Income tax (IAS 12) / Withholding tax on distributions received: income tax / Pillar Two income tax: current tax, without deferred tax / Levy not based on taxable profits: outside IAS 12

    Professional judgement based on the tax law of the case: a levy based on revenue or on assets, and not on taxable profits, is not an income tax.

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

    PROFIT_TAX_IN_SCOPE_REVENUE_LEVY_EXCLUDED

  • Rate retained at the reporting date

    JudgmentRequired

    Enacted rate

    Enacted rate / Substantively enacted rate (announcement having the effect of enactment) / Rate only announced, without the effect of enactment: rate in force kept

    Professional judgement: whether an announcement has the effect of enactment depends on the legislative process of the jurisdiction of the case (para. 48); this model sets no numerical criterion.

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

    RATE_ENACTED_BEFORE_REPORTING_DATE

11

Conclusion

Conclusion

  • Current tax finalised, balance at the reporting date and points submitted to the reviewer

    ConclusionRequired

12

Financial statement impact

FS impact

  • Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

    TableRequired

13

Normative references

References

  • Paragraphs cited in this workpaper (verification status shown from the register)

    References

14

Checks and financial statement impact

  • The classification of the levy is documentedPass
  • The rate retained is documentedPass
  • Taxable profit is computedPass
  • The bands of the scale cover taxable profit exactlyNot evaluated
  • The current tax entry (single rate) balancesPass
  • The current tax entry (graduated scale) balancesNot evaluated
  • The instalments entry balancesPass
  • The carry-back entry balancesNot evaluated
Assets
0
Liabilities
310,000
Profit or loss
-310,000
OCI
0
Equity
-310,000