![]() Step 3 IAS 12 requires deferred tax assets and liabilities to be measured at the tax rates that are expected to apply in the period in which the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. A temporary difference can be either a taxable or deductible temporary difference. Otherwise, a temporary difference arises. ![]() Step 2 If there is no difference between tax and accounting base, no deferred tax is required. The tax base has to be determined based on management intent and local tax laws and regulations. Step1 The accounting base is the carrying amount in the financial statements. The following flowchart summarises the steps necessary in calculating a deferred tax balance in accordance with IAS 12. This narrative looks at the definitions in the standard and explains, through the use of a flowchart, how to navigate through the requirements of IAS 12. IAS 12 requires a mechanistic approach to the calculation of deferred tax. Case – Deferred tax asset and liability in different companies in the same group Deferred tax calculations
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