A piece of machinery cost Rs. 500,000. Tax depreciation to date has amounted to Rs. 220,000 and
depreciation charged in the financial statements to date is Rs. 100,000. The rate of income tax is
30%.
Which of the following statements is incorrect according to IAS 12 Income Taxes?

Tall Limited (TL)’s accounting records shown the following:
Rs. 000
Income tax payable for the year                                                           60,000
Over provision in relation to the previous year                                  4,500
Opening deferred tax liability                                                                 2,600
Closing for deferred tax liability                                                             3,200
What is the income tax expense that will be shown in the statement of profit or loss for the year?

The following information has been extracted from the accounting records of Candle Limited:
Rs. 000
Estimated income tax
for the year ended 30 September 2020                                           Rs. 75,000
Income tax paid
for the year ended 30 September 2020                                           Rs. 80,000
Estimated income tax
for the year ended 30 September 2021                                            Rs. 83,000
What figures will be shown in the statement of comprehensive income for the year ended 30
September 2021 in respect of income tax?

Home Limited (HL) has the following balances included on its trial balance at 30 June 2014.
Rs. 000
Taxation                                                                                                                                              4,000 Credit
Deferred taxation                                                                                                                            12,000 Credit
The taxation balance relates to an over-provision from 30 June 2013.
At 30 June 2014, the directors estimate that the provision necessary for taxation on current year
profits is Rs. 15,000,000.
The carrying amount of HL’s non-current assets exceeds the tax written-down value by Rs.30,000,000.

The rate of tax is 30%.
What is the charge for taxation that will appear in the statement of profit or loss for the year to 30
June 2014?

Hall Limited has the following balances included on its trial balance at 30 June 2014:
Rs. 000
Taxation                                                                                      7,000 Credit
Deferred taxation                                                                    16,000 Credit
The taxation balance relates to an overprovision from 30 June 2013.
At 30 June 2014, the directors estimate that the provision necessary for taxation on current year
profits is Rs. 12 million. The balance on the deferred tax account needs to be increased to Rs. 23
million, which includes the impact of the increase in property valuation below.
During the year Hall Limited revalued its property for the first time, resulting in a gain of Rs. 10
million. The rate of tax is 30%.
What is the charge for taxation that will appear in the statement of profit or loss for the year to 30
June 2014?

Vase Limited (VL)’s assistant accountant has discovered that there is a debit balance on the trial
balance of Rs. 3,000 relating to the over/under-provision of tax from the prior year.
What impact will this have on VL’s current year financial statements?

A company’s trial balance shows a debit balance of Rs. 2.1 million brought forward on current tax
and a credit balance of Rs. 5.4 million on deferred tax. The tax charge for the current year is
estimated at Rs. 16.2 million and the carrying amounts of net assets are Rs. 13 million in excess of
their tax base. The income tax rate is 30%.
What amount will be shown as income tax in the statement of profit or loss for the year?

A company’s trial balance at 31 December 2013 shows a debit balance of Rs. 700,000 on current
tax and a credit balance of Rs. 8,400,000 on deferred tax. The directors have estimated the
provision for income tax for the year at Rs. 4.5 million and the required deferred tax provision is Rs.
5.6 million, Rs. 1.2 million of which relates to a property revaluation.
What is the profit or loss income tax charge for the year ended 31 December 2013?

The following information relates to an entity.
(i) At 1 January 2018 the carrying amount of non-current assets exceeded their tax written
down value by Rs. 850,000.
(ii) For the year to 31 December 2018 the entity claimed depreciation for tax purposes of Rs.
500,000 and charged depreciation of Rs. 450,000 in the financial statements.
(iii) During the year ended 31 December 2018 the entity revalued a property. The revaluation
surplus was Rs. 250,000. There are no current plans to sell the property.
(iv) The tax rate was 30%.
What is the deferred tax liability required by IAS 12 Income Taxes at 31 December 2018?

The accountant of an entity is confused by the term ‘tax base’. What is meant by ‘tax base’?

The carrying amount of Jewel Limited (JL)’s property, plant and equipment at 31 December 2013
was Rs. 310,000 and the tax was written down value was Rs. 230,000.
The following data relate to the year ended 31 December 2014:
(i) At the end of the year, the carrying amount of property, plant and equipment was Rs.
460,000 and the tax was written down value was Rs. 270,000. During the year some items were
revalued by Rs. 90,000. No items had previously required revaluation. In the tax jurisdiction
in which JL operates revaluations of assets do not affect the tax base of an asset or taxable
profit. Gains due to revaluations are taxable on sale.
(ii) JL began the development of a new product during the year and capitalised Rs. 60,000 in
accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred.
None of the expenditure had been amortised by the year-end.
What is the taxable temporary difference to be accounted for at 31 December 2014 in relation to
property, plant and equipment and development expenditure?

The carrying amount of Jewel Limited (JL)’s property, plant and equipment at 31 December 2013
was Rs. 310,000 and the tax was written down value was Rs. 230,000.
At the end of the year, 31 December 2014, the carrying amount of property, plant and equipment
was Rs. 460,000 and the tax was written down value was Rs. 270,000. During the year some items were
revalued by Rs. 90,000. No items had previously required revaluation. In the tax jurisdiction in which
JL operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due
to revaluations are taxable on sale.
The corporate income tax rate is 30%. The current tax charge was calculated for the year as Rs.
45,000.
What amount should be charged to the revaluation surplus at 31 December 2014 in respect of
deferred tax?

The carrying amount of Jewel Limited (JL)’s property, plant and equipment at 31 December 2013
was Rs. 310,000 and the tax was written down value was Rs. 230,000.
At the end of the year, 31 December 2014, the carrying amount of property, plant and equipment
was Rs. 460,000 and the tax was written down value was Rs. 270,000. During the year some items were
revalued by Rs. 90,000. No items had previously required revaluation. In the tax jurisdiction in which
JL operates revaluations of assets that do not affect the tax base of an asset or taxable profit. Gains due
to revaluations are taxable on sale.
The corporate income tax rate is 30%. The current tax charge was calculated for the year as Rs.
45,000.
What amount will be shown as current tax payable in the statement of financial position of JL at 31
December 2014?

Deferred tax assets and liabilities arising from taxable and deductible temporary differences. Which
one of the following is not a circumstance giving rise to a temporary difference?

Which of the following statements regarding taxation of lease arrangement are true?
(i) Depreciation expense and interest expense should be added back in accounting profit to
calculate current tax
(ii) Rental payments should be deducted from accounting profit for calculating current tax
(iii) Right of use asset has a tax base of nil resulting in a taxable temporary difference
(iv) Lease liabilities have a tax base of nil resulting in deductible temporary difference

Venice Limited (VL)’s assistant accountant estimated the tax expense for the year ended 31
December 2018 at Rs. 43,000. However, he had ignored deferred tax. At 1 January 2018 VL had a
deferred tax liability of Rs. 130,000. At 31 December 2018 VL had temporary taxable differences of
Rs. 360,000.
VL pays tax at 25%. All movements in deferred tax are taken to the statement of profit or loss.
What will be recorded as the tax expense in the statement of profit or loss for the year ended 31
December 2018?

The statements of financial position of Nitrogen Limited (NL) include the following extracts:
Statements of financial position                            2012                          2011
as at 30 September                                                  Rs. m                          Rs. m
Non-current liabilities
Deferred tax                                                                 310                               140
Current liabilities
Taxation                                                                         130                              160
The tax charge in the statement of profit or loss for the year ended 30 September 2012 is Rs. 270
million.
What amount of tax was paid during the year to 30 September 2012?

The trial balance of Hall Limited (HL) at 31 March 2016 showed credit balances of Rs. 800,000 on
current tax and Rs. 2.6 million on deferred tax.
A property was revalued during the year giving rise to a deferred tax of Rs. 3.75 million. This has been
included in the deferred tax provision of Rs. 6.75 million at 31 March 2016.
The income tax charge for the year ended 31 March 2016 is estimated at Rs. 19.4 million.
What will be shown as the income tax charge in the statement of profit or loss of HL at 31 March
2016?

Orange Limited (OL) is in the process of finalizing its financial statements for the year ended 30
June 2018.
OL sells goods with a 1-year warranty and it is estimated that warranty expenses are 2% of annual
sales. Actual payments during the year related to warranty claims were Rs. 54 million. Of these, Rs.
38 million pertain to goods sold during the previous year. The opening balance of provision for the warranty
was Rs. 49 million.
Sales for the year ended 30 June 2018 was Rs. 1,750 million. Under the tax laws, these expenses
are allowed on a payment basis. The applicable tax rate is 30%.
What is the amount of deferred tax expense or income in respect of the above for the year ended 30
June 2018?

Orange Limited (OL) is in the process of finalizing its financial statements for the year ended 30
June 2018.
Profit before tax for the year ended 30 June 2018 was Rs. 508 million.
OL sells goods with a 1-year warranty and it is estimated that warranty expenses are 2% of annual
sales. Actual payments during the year related to warranty claims were Rs. 54 million. Of these, Rs.
38 million pertain to goods sold during the previous year. The opening balance of provision for the warranty
was Rs. 49 million.
Sales for the year ended 30 June 2018 was Rs. 1,750 million. Under the tax laws, these expenses
are allowed on a payment basis. The applicable tax rate is 30%.
What is the amount of current tax after considering the above information for the year ended 30 June
2018?

Which of the following does NOT give rise to deferred tax?

Which TWO of the following are examples, where carrying amount is always equal to tax base?

The following information relates to a building of Jet Limited (JL).

 On 1 January 2018, the carrying amount of the building exceeded its tax base by Rs. 1,275,000.

 In 2018, JL claimed a tax depreciation of Rs. 750,000 and charged an accounting depreciation of Rs. 675,000.

 As of 31 December 2018, JL increased the carrying amount of the building by Rs. 375,000 on account of revaluation. Revaluation is not allowed in tax.

 The applicable tax rate is 32%.

The deferred tax liability as at 31 December 2018 in respect of building is: