Page 108 - Finac1 Test 1 slides

INCOME TAXES

Exempt Differences

• A deferred tax liability should be recognised for all taxable
temporary differences unless the deferred tax liability arises from

• goodwill for which amortisation is not deductible for tax

purposes; or

• the initial recognition of an asset or liability in a transaction
which

• is not a business combination; and
• at the time of the transaction, affects neither the accounting profit
nor the taxable profit (tax loss)

• These differences are then treated as exempt differences and no
deferred tax expense is provided on them.

• The initial recognition of an asset or a liability will therefore be
treated as an exempt difference if that item does not affect the
tax computation, meaning that specific asset or liability is never
taxable or deductible for tax purposes.

108