Question 1

The amount of tax charged against the profit is determined by the diluted earnings per share.

Accepted Answer

The amount of tax charged against the profit is determined by the taxable income and the applicable tax rate, not the diluted earnings per share.

Question 2

When all assets are accounted for together,the continual increasing of the aggregate liability suggests that provisions for deferred tax are not necessary

Accepted Answer

The continual increasing of the aggregate liability suggests that provisions for deferred tax are necessary to account for the future tax liability that will arise when the deferred tax asset is realized.

Question 3

Which tax rate should be used to calculate the deferred tax amount?&#10;A)The tax rate applying when the timing difference originated&#10;B)The tax rate applying when the tax will become payable&#10;C)Either a or b is acceptable&#10;D)The tax rate current at the date of accounting

Accepted Answer

The deferred tax amount is calculated using the tax rate that is expected to apply when the timing difference reverses. This is because the deferred tax amount represents the future tax liability that will arise when the timing difference reverses.

Question 4

How is the amount to be transferred to a deferred tax account calculated?&#10;A)Amount = tax allowances given $\times$ tax rate&#10;B)Amount = (tax rate - depreciation disallowed)$\times$ tax allowances&#10;C)Amount = tax rate $\times$ (tax allowances given - depreciation disallowed)&#10;D)Amount= tax rate $\times$ (tax allowances given + depreciation disallowed)

Accepted Answer

Deferred tax is calculated by applying the tax rate to the difference between tax allowances given and depreciation disallowed.

Question 5

IAS 12 has remained unchanged since its adoption in 1979

Accepted Answer

IAS 12 has been amended several times since its adoption in 1979, most recently in 2020 with the amendments related to the accounting for deferred tax on assets and liabilities arising from a single transaction.

Question 6

Is there a difference between the tax charge and the results of applying the tax rate of the accounting profits?&#10;A)There is no difference,the results are the same.&#10;B)There is a difference,which is caused by the different recognition and measurement rules of tax legislation and accounting GAAP.&#10;C)There is a difference,which is caused by changing tax rates&#10;D)There is a difference,which is caused by changing economic conditions

Accepted Answer

Tax legislation and accounting GAAP have different recognition and measurement rules which can cause a difference between the tax charge and the results of applying the tax rate to accounting profits. For example, tax laws may allow for certain deductions or exemptions that accounting rules do not. This difference can also be influenced by other factors such as timing differences or changes in tax laws.

Question 7

The amount of tax payable by a business is always clearly linked to the profits reported to the accountants.

Accepted Answer

The amount of tax payable by a business can be influenced by various deductions, credits, and adjustments that may not directly correlate with the profits reported to accountants. Tax laws allow for certain expenses to be deducted, and there may be tax credits available that reduce the amount of tax owed, which means the tax payable might not be directly proportional to reported profits.

Question 8

Taxes payable is a better measure of a companies performance than the profit after accounting tax figures

Accepted Answer

Taxes payable is a part of the profit after accounting tax figures and does not provide a complete picture of a company's performance. Profit after tax takes into account various expenses and revenue streams. It is a more holistic measure of a company's profitability and financial health.

Question 9

Which presumption does IAS 12 make about the way an entity will recover the carrying amount of an asset?&#10;A)The assumption that the carrying amount will be recovered through use&#10;B)The assumption that the carrying amount will be recovered through sale&#10;C)The assumption that the carrying amount will be recovered through inflation&#10;D)The assumption that the carrying amount will be recovered through acquisition

Accepted Answer

The answer of Which presumption does IAS 12 make about...

Question 10

What are the two exceptions to the recognition of deferred tax liabilities for all taxable temporary differences?&#10;A)The initial recognition of an asset which affects neither profit or loss and is not a business combination; the initial recognition of an asset which has been inherited&#10;B)The initial recognition of goodwill; the initial recognition of an asset which is required for response to an emergency&#10;C)The initial recognition of an asset which is required as a response to an emergency; the initial recognition of an asset which affects neither profit or loss and is not a business combination&#10;D)The initial recognition of goodwill; the initial recognition of an asset which affects neither profit nor loss and is not a business combination.

Accepted Answer

The two exceptions to recognition of deferred tax liabilities for all taxable temporary differences are the initial recognition of goodwill and the initial recognition of an asset which affects neither profit nor loss and is not a business combination.

Deck 21: Income Taxes