Income Taxes CTax Effect Accounting
... The profit and loss approach which existing AASB 1020/AAS 3 ¡®Income Taxes ¨CTax Effect Accounting¡¯ adopted, has been replaced by balance sheet approach. ... Australia Accounting Standards Board introduced the proposed accounting standard as a part of its international harmonization program. ... Last but not least, the different interests groups react to this change in accounting standards differently. ... In a word, it is inevitably for AASB to adopt the new accounting standard on income tax using balance sheet approach and abandoned profit and loss approach. ... The Australia Accounting Standard Board (AASB) announced the operative date of AASB 1020 (Balance sheet) approach is now deferred to 1 January 2005, as IAS 12 is itself under review by the International Accounting Standards Board (IASB). Before operative, entities can still continue with the existing AASB 1020/AAS 3 ¡®Income Taxes ¨CTax Effect Accounting¡¯ (P&L approach). ... html, October 2002) The conceptual basis of the current Accounting Standard dealing with Income Taxes is dramatically different from the proposed standard. The superseded standard adopted a profit and loss approach, which focused on the tax effect of items reflected in the statement of financial performance. ... Accounting for income taxes reflects the current and future tax consequences of past transactions and events. ... For example, a situation where land & building are revaluated for accounting purposes will give rise to tax liability. ... (Revised AASB1020¡ªAccounting For Income Tax, April 2002, http://www. ... pdf) Whenever the company incurs a tax loss, which may be carried forward as a deduction from taxable income of the company in future periods. ... 157) To implement the new approach, Australia Accounting Standards Board introduced the revision of AASB 1020 Income Taxes as a part of its international harmonization program. In addition, the AASB was actively involved with other national accounting standard setters. ... (Revised AASB1020¡ªAccounting For Income Tax, April 2002, http://www. ... pdf) There are some areas of complexity of the new Accounting Standard dealing with Income Taxes. ... ¡° These exceptions to the exceptions are applicable in such cases where a temporary difference arises from an acquisition of an entity or operation that could be accounted for in a way that give rise to goodwill and affects pre¡ªtax profit or taxable income before or at the time of initial recognition and arises form a compound financial instrument.¡±(Peter Carlson, Accounting for income taxes, www. ... The main reason of the whole basis of tax¡ªeffect accounting under review, both in Australia and in International environment, is due to no strong theoretical support under the concept framework.