Page 67 - Finac1 Test 1 slides - 5. Income Taxes (IAS 12)
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INCOME TAXES
Comprehensive Example
Note: Change in Tax Rate
• The tax rate is changing for all financial years starting on or
after 1 March 20.12. As a result, Montana Ltd will pay current
tax for the year ended 29 February 20.12 at 28% (the old tax
rate) but will pay current tax at 27% for the financial year
ending 28 February 20.13.
• In accordance with IAS 12.47, deferred tax assets and liabilities
shall be measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. As
deferred tax represents future tax consequences on assets and
liabilities, the deferred tax as at 29 February 20.12 should
therefore be raised at the tax rate that will apply in future,
being the new tax rate of 27%.
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