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Hi,
In IAS12 Deferred tax , a deferred tax liability shall be recognised for all taxable temporary diferences, except that the deferred tax liability arises from ” The inital recognition of an asset or liability in a transcation which is not a business combination; and at the time of transcation, affects neither accounting profit nor taxable profit(loss).
I am confued as to what is meant by ” affect neitehr accounting profit nor taxable profiyt(loss). Could someone kindly give me help in this. Please!
Its simple:
If there is a permanent difference deferred tax liability would not arise…!!Basically the logic of deferred tax is to match the tax for a year with the accounting profit as per the matching concept…
If a transaction neither effects accounting profit nor taxable profit then there is no issue of mismatch of tax for the year with the accounting profit for the year hence no deferred tax would be booked as the tax for the year is already in line with the accounting profit
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