In accordance with IAS: 12 Income Taxes, deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
Required:
Explain temporary differences. (2 marks)
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Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base. Temporary differences may be either:
- Taxable temporary differences which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or
- Deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.