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7- Income taxes - Coggle Diagram

- - - - As a result of past transaction or event, entity has an obligation to pay tax or right to future tax relief. Therefore, it has met the def. of assets and liabilities under the CF and has to recognised them in the FS
    - - The entity needs to record tax in FS in the same period as the tax is paid. If they are diff. then deferred tax adjustment is needed
        
        If deferred tax does not exist, then the tax will be charged using a cash basis, that is the tax is charged or can be recovered in future periods and will also be recorded in future periods. This will create accounting mismatch with the tax payable/recoverable recorded in FS
  - - - Entity get their tax relief in the form of tax depreciation
        
        The TB should be the same as CA because both of them are (cost-depreciation). However, there are still temporary diff because the depreciation rates are diff. Tax depreciation rates are higher than accounting depreciation which cause TTD and DTL because CA will be higher than TB
    - - Chargeable for tax on a cash basis that is when it is received, that is it is being recognised in the future, therefore the TB now is 0
      - Chargeable for tax when it is receivable, then the TB is recognised now and therefore the same as CA
    - - Attract tax relief when it is being paid, that is, it is being paid in the future, therefore the TB is 0 now
      - Attract tax relief when it is being payable, that is, it should be recognised now, therefore the TB is the same as the CA
    - - Cash basis, that is when it is being received, therefore the TB is 0 now.
    - - FS
        
        Provision is included when the criteria in IAS 37 are met
        
        A doubtful debts allowance is recognised in accordance with IFRS 9
      - Tax treatment
        
        Expenses related to provisions attract tax relief on a cash basis, therefore the TB is 0
        
        Expenses related to doubtful debts attract relief when the debts become irrecoverable and are written off, therefore the TB is 0
- - - - This arise when the entity's accrued income is accounted for using cash basis, that is the income will be taxable when it is being received in the future
        
        Tax to pay in the future
        
        DTL
    - - This arise when the entity's accrued expense is accounted for using cash basis, that is the tax relief can be attracted when the expense is being paid in the future
        
        Tax savings in the future
        
        DTA
- - - - Why?
        
        The complexities and difficulties involved will affect reliability
- - - - The asset and liability was not acquired in a business combination
      - The transaction has no effect on accounting/taxable profit