Sbr (int/UK) Strategic Business Reporting

S BR  (IN T & U K) :  S TRA TE G IC  BU SINES S  RE POR TI N G 

14 

K A P LAN   P UB LI S HI NG 

This situation is compounded by the fact that the country Rooble operates is in 

economic crisis including a significant decline in the currency’s exchange rate and 

high inflation. Future profits seem increasingly unlikely. 

(1 mark) 

No deferred tax asset for the unused tax losses should have been recognised.(1 mark) 

Differences between FRS 102 and IAS 12 Income Taxes 

Under IAS 12 Income Taxes, an entity recognises a deferred tax asset or liability for 

tax recoverable or payable in future periods as a result of past transactions or events.  

  

(1 mark) 

Such tax arises from temporary differences - that is the difference between the 

carrying amount of the entity’s assets and liabilities in the statement of financial 

position and their tax base, as well as the carry forward of currently unused tax 

losses and tax credits.  

(1 mark) 

Under FRS 102, deferred tax is recognised in respect timing differences at the 

reporting date.  

(1 mark) 

Timing differences are differences between taxable profits and total comprehensive 

income as stated in the financial statements which arise from the inclusion of income 

and expenses in tax assessments in periods different from those in which they are 

recognised in financial statements.  

(1 mark) 

In addition, FRS 102 states that deferred tax should be recognised on: 

• 

the carry forward of unused tax losses 

• 

the differences between the tax value and fair value of assets and liabilities 

acquired in a business combination, even though this impacts neither taxable 

profits nor total comprehensive income.  

(1 mark each) 

As such, FRS 102 is said to adopt a ‘timing difference plus’ approach. 

(1 mark) 

FRS 102 uses the term ‘permanent difference’, whereas IAS 12 does not use this 

term. 

(1 mark) 

In practice it is unlikely that the differences between FRS 102 and IAS 12 will cause a 

significant difference in terms of the recognition and measurement of deferred tax 

assets and liabilities.