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Company Reporting


Submitted By emerald910
Words 1461
Pages 6
1. Introduction

Accounting treatment for income taxes for for-profit entities is subject to Australian Accounting Standard Board (AASB) 112 Income Taxes. In accounting for income tax, complying with tax-effect method involves the occurrence of tax consequences due to different treatments are applied for transactions and other events happened inside an entity for accounting and taxation purposes, namely current tax consequences and future tax consequences.

The purpose of this report was to identify and analyze the reasoning behind the responsibility of exploration and development costs (E&D) for the creation of a deferred tax liability (DTL) and its treatments for both accounting and taxation purposes. Moreover, the analysis was performed with reference to case study of Gravatt Ltd., a company operating in the mining industry where its directors arguing on the disadvantages of applying tax-effect accounting standards of AASB 112 and rather not to comply with one.

This report was not discussing only on the rationale behind deferred tax liabilities according to AASB Framework for the Preparation and Presentation of Financial Statements and AASB 112 Income Taxes, but also the comparison of the impact on information utility captured by the users of financial statements of Gravatt in case of recognizing and unrecognizing deferred tax liabilities to be reported on its annual reports.

2. Discussion
2.1 Deferred Tax Liabilities
Deferred tax liabilities (DTL) can be defined as “the amounts of income taxes payable in future periods in respect of taxable temporary differences”, as expressly stated in AASB 112 Income Taxes (Australian Accounting Standard Board, 2012, p. 15). Pooler (2012) described DTL as a representation of the increase or decrease in taxes payable or refundable in future years due to temporary differences.

2.2 Creation of Deferred Tax

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