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
Which of the following is NOT an example of an agency cost? A. Paying an accounting firm to audit your financial statements. B. Paying an insurance company to assure that b

Can you help me balance my account number out

Q. If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a a. large stock dividend. b. cash divide

The real risk-free rate is 2%. Inflation is expected to be 2% this year and 5% during the next 2 years. Suppose that the maturity risk premium is zero. What is the yield on 2-ye

when youre using accounting software why would you use hot keys and shortcuts a.to quickly access commands b.to input data for you c.to start the program d.to write checks


Cherry Ltd has the following segment information from the consolidated financial statements for the years ended 31 December 2011 and 2012: Operating segments C V I N$ N$ N$ Sales

Evaluate 1-1/3(5/6 - 1/2) ---------------- 2/5 / 2/5(5/6-2/3)

A) Suppose you have two stocks (A and B) in your portfolio, worth $400,000 and $600,000 respectively. The annual volatility is 0.30 and 0.35 respectively. The correlation between t

Time tickets for factory employees during the month of August are summarized as follows. Prepare a journal entry to record the total factory payroll, the indirect payroll and the d