CFAS: PAS 12 - Income Taxes

Introduction and Purpose of PAS 1200:00:01

The session introduces income taxes under PAS 12, clarifying that it is not about taxation law but accounting for the difference between accounting income and income per tax return. It explains that income taxes are considered mixed accounts because they can recognize both deferred tax assets and deferred tax liabilities.

Permanent vs Temporary Differences00:02:53

The video defines the two types of differences between accounting income and taxable income. Permanent differences are items included in either accounting or taxable income but never in the other, and they do not reverse in future periods. Temporary differences reverse in future periods and give rise to deferred tax assets or liabilities.

Deferred Tax Assets and Liabilities00:06:55

The speaker explains that a deferred tax asset arises from a deductible temporary difference (future deductible amount) because future deductions reduce tax liability. Conversely, a deferred tax liability arises from a taxable temporary difference (future taxable amount) because future taxable amounts increase tax liability.

Reconciliation Scenarios00:11:21

The video outlines how to reconcile accounting income versus taxable income. If accounting income is greater than taxable income, it results in a future taxable amount and a deferred tax liability. If accounting income is less than taxable income, it results in a future deductible amount and a deferred tax asset.

Measurement of Deferred Taxes00:17:30

The final section covers how to measure deferred tax assets and liabilities using the tax rate enacted or expected to apply at the time of reversal, rather than the current rate if the reversal happens in a future period with a different rate.