IAS 12 Income Taxes | Annualreporting.info

Government grants and assistance

The receipt of government grants/assistance by an entity may be significant for the preparation of the financial statements for two reasons. Firstly, if resources have been transferred, an appropriate method of accounting for the transfer must be found. Secondly, it is desirable to give an indication of the extent to which the entity has benefited from such assistance during the reporting period. This facilitates comparison of an entity’s financial statements with those of prior periods and with those of other entities.

Scope/Objective

IAS 20 is applied in accounting for, and in the disclosure of, government grants and in the disclosure of other forms of government assistance.

Government grants are sometimes called by other names such as subsidies, subventions or premiums.… Read more

Deferred tax assets – Future tax profits

The availability of future taxable profits – a problem in four parts Deferred tax assets – Future tax profits

The best starting point for determining the availability of future taxable profits is a company’s own business planning cycle and resulting forecasts. Using the company’s forecasts to assess the value of assets with potentially significant impact is not a unique exercise for most telecom operators. Given the significant balances of goodwill, other intangible and tangible assets, impairment testing is an important element of their financial reporting process. Deferred tax assets – Future tax profits

Impairment tests generally are based on approved budgets, which result from a robust budgeting process, and often external experts are involved throughout the impairment process. Often, the Read more

Valuing deferred tax assets

Judgment! Judgment! Judgment! Judgment! Judgment! Judgment! Judgment! Judgment! OK?

The telecommunications industry is very dynamic, driven by technological developments and changes in the competitive and regulatory environment. Due to the significant capital expenditure involved in building infrastructure, investment recovery periods tend to be longer than in many other industries. In the past, a number of telecom operators have recorded significant start-up trading losses and losses due to impairment charges on licences or goodwill and other assets resulting from business combinations. Depending on local tax legislation, operators can use these losses to offset future taxable income.

Companies are required to assess the accumulated losses and the recoverability of any related deferred tax assets (DTA) each year. The amounts involved are Read more

Accounting for government levies

What is a levy? Accounting for government levies

A levy is defined as an outflow of resources (embodying economic benefits) that is imposed by governments (including government agencies and similar bodies whether local, national or international) on entities in accordance with legislation (i.e., laws and/or regulations).

When do I record a liability to pay a levy? Accounting for government levies

  • The obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by the legislation.
  • The activity that triggers payment may occur “over time” (e.g., revenue generating activities occurring during a year) or be at a “point-in-time” (e.g., a specified date or when a transaction occurs).
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