Page 27 - Finac1 Test 1 slides - 5. Income Taxes (IAS 12)
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INCOME TAXES
Capital Allowances
• If the depreciation rate and the tax allowance rate (capital
allowances) on the same asset differ, it will result in a different
carrying amount and tax base for that asset.
• The difference between the carrying amount and the tax base of
the asset leads to taxable or deductible temporary differences.
• This in turn may result in the profit or loss on sale of the asset in
the statement of profit or loss and other comprehensive income
differing from that calculated in accordance with the tax
legislation.
• A profit on sale is generally referred to in the tax legislation as a
recoupment whereas a loss on sale is often referred to as a
scrapping allowance (generally granted as a deduction if certain
criteria are met).
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