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Welcome to Financial Reporting – Module 4: Income Taxes! In this episode, we tackle how income taxes flow through the financial statements—separating current tax (payable/refundable for the period) from deferred tax (the future tax effects of today’s temporary differences).
We’ll demystify the core ideas under IAS 12: tax bases, temporary vs. permanent differences, and when to recognize deferred tax assets (DTAs) and deferred tax liabilities (DTLs)—including the probable criterion for DTAs, the initial recognition exemption, and the special case of goodwill. You’ll see common sources of temporary differences (depreciation methods, provisions, revenue recognition, fair value changes, revaluations taken to OCI, and business combinations) and how to measure deferred tax using enacted/substantively enacted rates.
By the end, you’ll be able to analyze and explain the tax line with confidence, connecting policy choices and estimates to their impact on profit, equity, and cash flows. Let’s dive in.
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