hkas12-Income Taxes

HKAS12RevisedNovember2004June2010HongKongAccountingStandard12IncomeTaxesHKAS12©Copyright2COPYRIGHT©Copyright2008HongKongInstituteofCertifiedPublicAccountantsThisHongKongFinancialReportingStandardcontainsInternationalAccountingStandardsCommitteeFoundationcopyrightmaterial.ReproductionwithinHongKonginunalteredform(retainingthisnotice)ispermittedforpersonalandnon-commercialusesubjecttotheinclusionofanacknowledgmentofthesource.RequestsandinquiriesconcerningreproductionandrightsforcommercialpurposeswithinHongKongshouldbeaddressedtotheDirector,OperationandFinance,HongKongInstituteofCertifiedPublicAccountants,37/F.,WuChungHouse,213Queen'sRoadEast,Wanchai,HongKong.AllrightsinthismaterialoutsideofHongKongarereservedbyInternationalAccountingStandardsCommitteeFoundation.ReproductionofHongKongFinancialReportingStandardsoutsideofHongKonginunalteredform(retainingthisnotice)ispermittedforpersonalandnon-commercialuseonly.FurtherinformationandrequestsforauthorisationtoreproduceforcommercialpurposesoutsideHongKongshouldbeaddressedtotheInternationalAccountingStandardsCommitteeFoundationat(November2004June2010)©Copyright3CONTENTSparagraphsINTRODUCTIONIN1–IN14HongKongAccountingStandard12IncometaxesOBJECTIVESCOPE1-4DEFINITIONS5-11Taxbase7-11RECOGNITIONOFCURRENTTAXLIABILITIESANDCURRENTTAXASSETS12-14RECOGNITIONOFDEFERREDTAXLIABILITIESANDDEFERREDTAXASSETS15-45Taxabletemporarydifferences15-23Businesscombinations19Assetscarriedatfairvalue20Goodwill21-21BInitialrecognitionofanassetorliability22-23Deductibletemporarydifferences24-33Goodwill32AInitialrecognitionofanassetorliability33Unusedtaxlossesandunusedtaxcredits34-36Reassessmentofunrecogniseddeferredtaxassets37Investmentsinsubsidiaries,branchesandassociatesandinterestsinjointventures38-45MEASUREMENT46-56RECOGNITIONOFCURRENTANDDEFERREDTAX57–68CIncomestatementItemsrecognisedinprofitorloss58–60Itemscreditedorchargeddirectlytoequityrecognisedoutsideprofitorloss61A-65ADeferredtaxarisingfromabusinesscombination66–68Currentanddeferredtaxarisingfromshare-basedpaymenttransactions68A-68CPRESENTATION6971–78Taxassetsandtaxliabilities6971–76Offset71-76Taxexpense77-78Taxexpense(income)relatedtoprofitorlossfromordinaryactivities77Exchangedifferencesondeferredforeigntaxliabilitiesorassets78DISCLOSURE79-88EFFECTIVEDATE89-9195APPENDICES:A.ExamplesoftemporarydifferencesB.IllustrativecomputationsandpresentationC.ComparisonwithInternationalAccountingStandardsHKAS12(December2007June2010)©Copyright4DAmendmentsresultingfromotherHKFRSsHongKongAccountingStandard12IncomeTaxes(HKAS12)issetoutinparagraphs1-9195.Alltheparagraphshaveequalauthority.HKAS12shallbereadinthecontextofitsobjective,thePrefacetoHongKongFinancialReportingStandardsandtheFrameworkforthePreparationandPresentationofFinancialStatements.HKAS8AccountingPolicies,ChangesinAccountingEstimatesandErrorsprovidesabasisforselectingandapplyingaccountingpoliciesintheabsenceofexplicitguidance.HKAS12(June2010)©Copyright5IntroductionIN1HKAS12iseffectiveforaccountingperiodsbeginningonorafter1January2005.ThemajorfeaturesofHKAS12areasfollows.IN2HKAS12requiresanentitytoaccountfordeferredtaxusingthebalancesheetliabilitymethod,whichfocusesontemporarydifferences.Temporarydifferencesaredifferencesbetweenthetaxbaseofanassetorliabilityanditscarryingamountinthestatementoffinancialposition.Thetaxbaseofanassetorliabilityistheamountattributedtothatassetorliabilityfortaxpurposes.IN3HKAS12requiresanentitytorecogniseadeferredtaxliabilityor(subjecttocertainconditions)assetforalltemporarydifferences,withcertainexceptionsnotedbelow.IN4HKAS12requiresthatdeferredtaxassetsshouldberecognisedwhenitisprobablethattaxableprofitswillbeavailableagainstwhichthedeferredtaxassetcanbeutilised.Whereanentityhasahistoryoftaxlosses,theentityrecognisesadeferredtaxassetonlytotheextentthattheentityhassufficienttaxabletemporarydifferencesorthereisconvincingotherevidencethatsufficienttaxableprofitwillbeavailable.IN5AsanexceptiontothegeneralrequirementsetoutinparagraphIN3above,HKAS12prohibitstherecognitionofdeferredtaxliabilitiesanddeferredtaxassetsarisingfromcertainassetsorliabilitieswhosecarryingamountdiffersoninitialrecognitionfromtheirinitialtaxbase.IN6Anentityshallrecogniseadeferredtaxliabilityforalltaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,branchesandassociates,andinterestsinjointventures,excepttotheextentthatbothofthefollowingconditionsaresatisfied:(a)theparent,investororventurerisabletocontrolthetimingofthereversalofthetemporarydifference;and(b)itisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Wherethisexceptionhastheresultthatnodeferredtaxliabilitieshavebeenrecognised,HKAS12requiresanentitytodisclosetheaggregateamountofthetemporarydifferencesconcerned.IN7HKAS12prohibitstherecognitionofdeferredtaxliabilitiesarisingfromtheinitialrecognitionofgoodwill.IN8HKAS12requiresanentitytorecogniseadeferredtaxliabilityinrespectofassetrevaluations.IN9Thetaxconsequencesofrecoveringthecarryingamountofcertainassetsorliabilitiesmaydependonthem