IAS 12: Income Tax

1. Introduction and Balance Method

International Accounting Standards (NIC / IFRS) are technical accounting standards adopted by the IASB (London) that constitute the globally accepted manual for accounting activity.

The IAS 12 implements the comprehensive balance sheet method to account for income tax, recognizing both current and future tax consequences of the recovery or settlement of assets and liabilities. Differences between the carrying amount and the tax base (and carried forward losses) generate deferred tax liabilities or assets.

2. Objective and Principle of Accounting Symmetry

Prescribe the accounting treatment of income tax on the recovery of assets/liabilities and period events. Under the principle of accounting symmetry, tax effects are recorded the same as the original transaction:

• In results, if the transaction goes to results.
• Outside of results (in other comprehensive income or equity), if the transaction is recognized there.
• In business combinations, affecting the capital gain or an advantageous purchase.

3. Scope and Exceptions

• What does it include? All domestic or foreign income taxes, including withholdings on dividends paid by subsidiaries or associates.
• What does NOT directly address? The accounting methods for government grants (IAS 20) nor tax credits for investments (although it does deal with the temporary differences arising from them).