Page 181 - FR Integrated Workbook 2018-19

Taxation

2.2 Calculating temporary differences

Deferred tax is calculated by comparing the carrying amount of an asset or liability to
its tax base.

The tax base of an asset or liability is its value for tax purposes.

It is important to consider whether the carrying amount or the tax base is the larger
figure:

Carrying amount > Carrying amount <
Tax base Tax base

(a taxable difference) (a deductible difference)

Deferred tax liability Deferred tax asset

The calculation of deferred tax assets is not examined within Financial Reporting,
and liabilities will usually be calculated based on temporary differences on non-
current assets.

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