Corporation tax-income tax-financial statement, Financial Accounting

Corporation Tax

This is the tax payable by companies on their trading activities of a given financial period. The standard doesn’t give the guidelines on how this tax should be computed because the corporation tax is based on the rules and procedures of a country with regards to tax matters.

However, once this tax has been computed then the standard gives the guidelines on how it should be treated in the financial statements.

IAS 12 requires that income tax should be shown as a separate item on the face of the income statement and described as “Income tax expense”. If part of this amount remains unpaid, then it should be shown as part of current liabilities in balance sheet and described as “Current tax”.

In practice, it may be difficult for a company to know exactly how much tax should be paid in relation to a given financial period. Therefore, many companies use an estimate for the purpose of completion of the accounts.

In the subsequent financial period, the amount actually payable would be confirmed with the tax authorities and the firm may be required to pay either more than or less than what was actually provided for.

The ‘the more than’ or ‘less than’ tax is called on under or over provision of previous years tax.

IAS 12 requires that under or provision of previous year’s tax should be adjusted for in the period in which it arises and thus the company shouldn’t adjust its previous year’s financial statements.

An underprovision of previous years tax will thus be added to the current years income tax expense and over provision of previous years tax will be deducted from the current years income tax expense and eventually the net amount shown as the income tax expense in the income statement.

Posted Date: 12/12/2012 12:27:39 AM | Location : United States







Related Discussions:- Corporation tax-income tax-financial statement, Assignment Help, Ask Question on Corporation tax-income tax-financial statement, Get Answer, Expert's Help, Corporation tax-income tax-financial statement Discussions

Write discussion on Corporation tax-income tax-financial statement
Your posts are moderated
Related Questions
POWERS OF INVESTMENT The trustees have a duty to obtain control of trust assets and to invest trust funds in authorised securities.   The trustees may invest in such securities

3:Barnes Baskets, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is

Presented below are four independent situations which you as a Manager Trainee employed with Your Company have been asked to evaluate. Evaluate each situation based on what each re

Seattle Health Plans currently uses zero debt financing.  Its operating income (EBIT) $1 million, and it pays taxes at a 40 percent rate.  It has $5 million in assests and because

Jaedan Industries has the following account balances as of December 31, 2010.  The firm's dividend payout ratio is 25% and the tax rate is 34%.  The firm's stock price on December

#qUsing these data from the comparative balance sheet of Junior Company, perform horizontal analysis. JUNIOR COMPANY

The business changed their policy with regards to the profit mark-upfrom 2018 to 2019 financial year. What was the changed.

During its financial year ended 30 June 20x7 Beavers Ltd, an engineering company, has worked on several contracts. Information relating to one of them is given below.

Assessment Criteria: Student work will generally be assessed in terms of the following criteria: 1. Preparation of correct journal entries. 2. Accumulation of journal entr

Q. What do you mean by Franchise? Franchise - Legal arrangement whereby owner of a franchisor, trade name, contracts with a party who wants to use the name on a non-exclusive b