IAS 12

Deferred Tax
Calculator

Compute temporary differences, deferred tax assets and liabilities, net position, and period movement. Handles P&L vs OCI allocation and unrecognised DTAs.

IAS 12 requires an entity to recognise deferred tax liabilities for all taxable temporary differences (IAS 12.15) and deferred tax assets for deductible temporary differences to the extent that it is probable that taxable profit will be available (IAS 12.24). The tax base is defined in IAS 12.7–8 and determines whether a temporary difference exists between the carrying amount and the amount recoverable or deductible for tax.

Tax rates & opening balances

Enter the current tax rate and optionally a future enacted rate for deferred items. Opening balances enable period movement calculation.

Deferred tax schedule

Enter each asset or liability with its carrying amount and tax base. Temporary differences and DTA/DTL are computed automatically.

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IAS 12.7: The tax base of an asset is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to the entity when it recovers the carrying amount of the asset.

IAS 12.8: The tax base of a liability is its carrying amount, less any amount that will be deductible for tax purposes in respect of that liability in future periods.

IAS 12.24: A deferred tax asset shall be recognised for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.

IAS 12 deferred tax: how the calculation works

Deferred tax accounting bridges the gap between accounting profit and taxable profit. When an asset or liability has a different value for accounting purposes than for tax purposes, a temporary difference arises. IAS 12 requires entities to recognise the future tax consequences of these differences on the balance sheet.

Taxable vs deductible temporary differences

Taxable temporary differences result in taxable amounts when the carrying amount of the asset or liability is recovered or settled. They give rise to deferred tax liabilities (DTLs). Example: accelerated depreciation where the tax base is lower than the carrying amount.

Deductible temporary differences result in deductible amounts in future periods. They give rise to deferred tax assets (DTAs), but only if recognition criteria are met. Example: a warranty provision that is not deductible until paid.

Recognition of deferred tax assets

The most significant judgment in deferred tax accounting is whether a DTA should be recognised. IAS 12.24 requires probable future taxable profits. Auditors scrutinise management's profit forecasts, tax planning strategies, and the entity's history of generating taxable profits. An entity with recent losses faces a high bar for DTA recognition.

Frequently asked questions

What is a temporary difference under IAS 12?
A temporary difference is the difference between the carrying amount of an asset or liability in the statement of financial position and its tax base. Temporary differences may be taxable (resulting in future tax payments, giving rise to a DTL) or deductible (resulting in future tax deductions, giving rise to a DTA). Unlike permanent differences, temporary differences reverse over time.
When should a deferred tax asset not be recognised?
IAS 12.24 states that a DTA should only be recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. If an entity has a history of recent losses or there is no convincing evidence of sufficient future taxable profit, the DTA should not be recognised. This is one of the most significant judgments in deferred tax accounting.
What is the difference between the tax base of an asset and a liability?
For an asset (IAS 12.7): the tax base is the amount that will be deductible for tax purposes when the carrying amount is recovered. If revenue from the asset is not taxable, the tax base equals the carrying amount. For a liability (IAS 12.8): the tax base is the carrying amount less any amount deductible for tax in future periods. For revenue received in advance, the tax base is the carrying amount less any revenue that will not be taxable in future periods.
Should deferred tax go through P&L or OCI?
IAS 12.61A requires deferred tax to be recognised in the same component of profit or loss or other comprehensive income as the transaction that gives rise to it. For example, deferred tax on a revaluation surplus recognised in OCI should itself be recognised in OCI, not in profit or loss. This ensures consistency between the tax effect and the underlying transaction.
Which tax rate should be used — current or future?
IAS 12.47 requires deferred tax assets and liabilities to be measured at the tax rates expected to apply when the asset is realised or the liability settled. If substantively enacted future rates differ from the current rate, the future rate should be used. The rate must be enacted or substantively enacted by the reporting date.

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