FR - Deferred Income Taxes

Question 1

What are the two major issues for income taxes and explain the deferred tax

Answer 1

Two major issues
- What amount should be reported as income tax expenses in the F/S
- How should the amount of income tax expenses be presented in the F/S

Deferred taxes - are recorded on the temporary difference
Deferred tax calculation supports additional tax expenses entries related to the accrued item reported differently under the two system
- Current taxes paid are based on a tax return calculation rather than on the accrual principles for F/S

Question 2

What are temporary difference classified as

Answer 2

Can be classified as deductible or taxable
- Will cause future taxable income to increase when it is reversed
CCA - deducted from the cost of the recorded asset for taxation, the remaining balance is known as UCC

Question 3

Explain what Deferred income tax liability, deductible temporary difference, deferred income tax asset

Answer 3

Deferred income tax liability - Impact on a taxable temporary in the financial record
Deductible temporary difference - Will cause future taxable income to decrease Ex. Warranty liability
Deferred Income tax asset - Impact of a deductible temporary difference in the financial record

Question 4

How do you calculate the tax base of the asset, the tax base of a liability

Answer 4

Accounting based on an asset + deductible temporary difference - the taxable temporary difference

Tax base of Liability - Accounting base of liability - deductible temporary difference + taxable temporary difference

Account base liability < tax base, results in a taxable temporary difference
Accounting base of liability > tax base, resulting in a deductible temporary difference

Use for - Warranty liability, Lease under IFRS, Decommissioning provision, lawsuit accrual, depreciable PP&E, investment classified as FVPL, FVOCI, Loss carryforwards

Question 5

1. What is the accounting entry when the taxable obligation to pay more tax in the future and
2. tax liability is deducted from accounting basis of deduction

Answer 5

1. Dr. Deferred income tax expenses xx
   Cr. Deferred income tax liability xx
2. Deferred income tax asset. xx
   Cr. Deferred income tax expenses (recovery xx

Question 6

What is the accounting measurement where deductible temporary difference result in future income being lower than future accounting income

Answer 6

Dr. Deferred income tax asset
Cr. Deferred income tax expenses (recovery). xx

Question 7

What are the two types of tax losses

Answer 7

1. Capital losses - related to buying and selling non-depreciable capital items such as investments in shares
2. Non-capital losses - related to the business overall

Taxable temporary difference x substantive enacted rate = deferred income tax liability

Question 8

What is the Handbook used for IFRS or ASPE

Answer 8

IFRS - IAS 12
ASPE - 3465

Question 9

What is needed for the presentation and disclosure

Answer 9

IAS 12 - Deferred tax assets and liability are presented as non-current and liabilities irrespective of when they are expenses to reverse
Major components
- CUrrent income tax expenses
- Deferred tax expense due to temporary difference
- Deferred tax expenses due to change in tax rate

Question 10

What is the difference between IFRS and ASPE

Answer 10

• Are very similar
• ASPE - Deferred taxes are referred to future income taxes
  Taxes payable method - only current income taxes are recorded, deferred taxes are ignored or the future income tax method is used