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Company Reporting

In: Business and Management

Submitted By ipatrickx
Words 1275
Pages 6
Table of Contents

1.0 Introduction 1 2.0 Discussion 2 2.1 Exploration and Development costs creates a Deferred Tax Liability 2 2.2 Analysis on arguments by directors 3 2.2.1 No Income Tax Expenses 3 2.2.2 No deferred tax liability 4 2.2.3 Tax losses 5 2.3 Information utility to users of financial report of deferred tax liabilities 6 3.0 Conclusion 7 References 8

1.0 Introduction

Accounting Standard AASB 112 (Income Taxes) prescribe the accounting treatment for income taxes. As stated by Leo, Hoggett, & Sweeting (2012), transactions undertaken by an entity and other events affecting the entity have two separate effects, which are current and future tax consequences. This is because accrual principal is applied on accounting treatment whereas income tax treatment uses the cash flow method. For accounting treatment, accounting profit is profit or loss for a period before deducting tax expense whereas for income tax treatment, taxable income described as gross income minus any allowable deduction. Difference between accounting and tax treatments lead to taxable temporary differences and deductible temporary differences. Discussion was carried out to determine how exploration and development cost create a deferred tax liability, analyse the argument presented by the directors in view of the AASB 112 and discuss the infromation ultility to readers of annual report of including or excluding deferred tax liability.

2.0 Discussion
2.1 Exploration and Development costs creates a Deferred Tax Liability As stated by Leo, Hoggett, & Sweeting (2012), deferred tax liability is the amounts of income taxes payable in future periods in respect of taxable temporary differences. Taxable temporary difference are temporary differences that will result in the payment of taxes when the carrying amount of a liability settled or carrying amount of

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