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AASB 112 - Income Taxes

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Text of the Standard 
Summary 
AIFRS compared to IFRS and old AGAAP 
Interpretations and guidance 
Questions & answers 
Articles 

 
 
Comparison between AASB 112 and IAS 12 
Comparison by Jeffrey Knapp 
 
Background 
 
AASB 112 ‘Income Taxes’ is the Australian equivalent to IAS 12 of the same name. It was made by the AASB on 15 July 2004 as part the AASB’s program to adopt International Financial Reporting Standards by 2005.  
 
AASB 112 Compared to IAS 12 
 
Additions 
 
Paragraph Description 
 
Aus 1.1 Which entities AASB 112 applies to, ie. reporting entities and general purpose financial reports. 
 
Aus 1.2 The application date of AASB 112, ie. annual reporting periods beginning 1 January 2005. 
 
Aus 1.3 Prohibits early application of AASB 112. 
 
Aus 1.4 Makes the requirements of AASB 112 subject to AASB 1031 ‘Materiality’. 
 
Aus 1.5 Explains which Australian Standards have been superseded by AASB 112. 
 
Aus 1.6 Clarifies that the superseded Australian Standards remain in force until AASB 112 applies. 
 
Aus 1.7 Notice of the new Standard published on 22 July 2004. 
 
Aus 2.1 Clarifies that income tax equivalents of public sector entities are included within the scope of the Australian Standard. 
 
Aus 33.1 Clarifies that non-taxable government grants received by a not-for-profit entity are recognised as income immediately and do not give rise to a deductible temporary difference and deferred tax asset. 
 
Aus 80.1 Additional disclosure required of the reasons why recognition of exchange differences on deferred foreign tax liabilities or assets in the income statement instead of the balance sheet is the most useful to users of the financial statements. 
 
 
Deletions 
 
Paragraph Description 
 
81(c)(ii) Disclosure of a numerical reconciliation between the average effective tax rate and the applicable tax rate together with the basis on which the applicable tax rate is computed. 
 
 
89 Effective date of IAS 12. 
 
90 Reference to superseded IAS 12. 
 
91 Effective date of certain paragraphs that were added to IAS 12 subsequent to 1998. 
 
 
 
Differences Between AASB 112 and AASB 1020 
Comparison from the Australian Accounting Standards Board 
 
This section identifies differences between AASB 1020 Income Taxes and AASB 112 Income Taxes under the following headings. 
 
A: Incompatibilities between AASB 1020 and AASB 112 
B: AASB 1020 is more detailed or restrictive  
C: AASB 112 is more detailed or restrictive  
D: AASB 1020 disclosures are more extensive 
E: AASB 112 disclosures are more extensive 
 
The 1989 version of AASB 1020 is not considered in this comparison. The 1989 Standard adopts an “income statement approach” to accounting for income taxes, which has a significantly different conceptual basis from AASB 112 and the 1999 version of AASB 1020. An explanation of the differences between the 1989 and 1999 versions of AASB 1020 can be found in Appendix 4 to AASB 1020 (1999 version). 
 
This analysis of differences should not be taken as providing an exhaustive list of differences.  
 
Introduction 
 
Both AASB 112 and AASB 1020 adopt a “balance sheet approach” to accounting for income taxes which is based on the general principle that the current and future tax consequences of transactions and other events recognised in an entity’s balance sheet give rise to current and deferred tax liabilities and assets. In implementing this principle, both AASB 112 and AASB 1020 adopt the notions of “tax base” and “temporary difference” and require: 
· deferred tax liabilities to be recognised for all taxable temporary differences (except in certain circumstances relating to goodwill, the initial recognition of assets and liabilities, and investments in subsidiaries, branches, associates and joint ventures); 
· deferred tax assets to be recognised for deductible temporary differences, but only to the extent that it is probable that future taxable amounts will be available against which the deductible temporary differences can be utilised (provided those deductible temporary differences do not arise from the initial recognition of assets or liabilities in certain circumstances or from certain investments in respect of which it is probable that the temporary difference will not reverse in the foreseeable future); 
· deferred tax assets to be recognised for the carry forward of unused tax losses, but only to the extent it is probable that future taxable amounts will be available against which the unused tax losses can be utilised; 
· deferred tax liabilities and assets to be measured having regard to the manner in which the entity expects, at reporting date, to recover or settle the carrying amount of its assets and liabilities using the tax laws that have been enacted or substantively enacted by the reporting date; and 
· current and deferred tax to be recognised as an expense or income in profit or loss for the reporting period, except in certain circumstances where it is required to be recognised as a direct debit or credit to equity or as a direct adjustment to goodwill (for example, current and deferred tax is generally recognised as a direct debit or credit to equity when the tax relates to an amount that was recognised as a direct credit or debit to equity). 
 
Differences 
 
A. Incompatibilities between AASB 1020 and AASB 112 
 
A.1 Discount on acquisition 
 
AASB 3 Business Combinations requires any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination to be recognised immediately in profit or loss. In contrast, AASB 1013 Accounting for Goodwill defines any excess of the acquirer’s interest in the fair value of identifiable net assets acquired over the cost of acquisition as a discount on acquisition. That discount is accounted for by reducing proportionately the fair values of the non-monetary identifiable assets acquired and recognising any remaining balance as revenue. This treatment of a discount on acquisition has the effect of decreasing any deferred tax liabilities and increasing any deferred tax assets required to be recognised on initial recognition of those non?monetary assets in accordance with AASB 1020.4.2, 4.3, 6.1(b)(i) and 7.3. 
 
A.2 Tax rate affected by distributions 
 
Where the tax rates applicable to the entity are affected by the distribution of the net profit or loss or retained earnings, AASB 112.52A comments that current and deferred tax assets and liabilities are measured at the tax rate applicable to undistributed profits. AASB 112.52B further comments that the income tax consequences of dividends are recognised when a liability to pay the dividend is recognised. In contrast, where the tax rates applicable to the entity are affected by the distribution of the net profit or loss or retained earnings, AASB 1020.4.6.6 comments that the applicable tax rate is the rate that reflects how it is expected that distributions will be made. Where it is not possible to ascertain whether and how future distributions will be made, AASB 1020.4.6.6 comments that the tax balances are calculated on the basis that no distributions will be made. Therefore, to the extent that a liability to pay distributions has not been recognised but it is possible to ascertain whether and how future distributions will be made, the calculation of the tax balances would be based on the tax rate applicable to undistributed profits under AASB 112 but, under AASB 1020, on the tax rate applicable to distributed profits. 
 
A.3 Transactions directly to equity – exceptions – negative asset revaluation reserve 
 
Both AASB 112.61 and AASB 1020.10.2 require current and deferred tax to be directly debited (credited) to equity if the tax relates to an amount that is or was directly credited (debited) to equity. However, AASB 1020.10.4 explicitly includes three exceptions to this general rule. Under the first of these exceptions (AASB 1020.10.4(a)), current and deferred tax is recognised as an expense or income in profit or loss for the period if the amounts to which the tax relates were credited or debited to an asset revaluation reserve in a previous reporting period, but only to the extent that the current and deferred tax would otherwise cause the asset revaluation reserve for that class of asset to have a negative carrying amount. This would occur, for example, where the net amount previously recognised in an asset revaluation reserve for a particular class of noncurrent assets has been distributed as dividends or bonus shares and a change in tax rates causes the deferred tax originally recognised in the reserve to increase. A similar exception is not included in AASB 112. Therefore, under AASB 112.61, where, for example, the net amount previously recognised in an asset revaluation reserve for a particular asset has been distributed, an increase in the deferred tax liability as a result of a change in tax rates would still be required to be recognised as a direct debit to the asset revaluation reserve. 
 
A.4 Alternative measurement of deferred tax liabilities/assets 
 
AASB 1020.4.5, 4.6, 4.6.3 and 9.3 acknowledge that another Australian Standard may require or permit current or deferred tax liabilities and assets to be measured differently from the way in which they are required to be measured under AASB 1020. AASB 1038 Life Insurance Business (issued in November 1998), paragraph 14.1, requires tax assets and tax liabilities to be measured at present values. In contrast, AASB 112 does not permit discounting. 
 
B. AASB 1020 is more detailed or restrictive 
 
B.1 Calculation of current tax 
 
In relation to the calculation of current tax, AASB 1020.3.1.1 comments that: 
· where an entity’s annual reporting period does not coincide with a year of income, current tax is calculated in accordance with the legislation as if the reporting period is a year of income; and 
· current tax for a group of entities is calculated in accordance with the legislation as if the group of entities is a taxable entity. 
AASB 112 does not address these issues. 
 
B.2 Indemnity arrangements 
 
AASB 1020.3.1.5 comments that where an entity arranges to indemnify itself from changes in tax rates or other changes in tax laws, such indemnity arrangements are accounted for separately and do not affect the requirement in AASB 1020 to account for the income tax that is based on the entity’s taxable income. AASB 112 does not address this issue. 
 
B.3 Tax base of assets and liabilities 
 
Both AASB 112.7 and AASB 1020 (section 5) provide guidance on, and examples of, the calculation of the tax base of assets. However, the guidance and examples in AASB 1020 address a broader range of circumstances than the guidance and examples in AASB 112. Both AASB 112.8 and AASB 1020.5.2-5.2.1 and example 4 address the calculation of the tax base of a liability that is not in the nature of revenue received in advance. However the requirements and guidance in AASB 1020 are more extensive than the guidance in AASB 112.8. For example, unlike AASB 112, AASB 1020 addresses determination of the tax base of such liabilities in circumstances where settlement of the liability is expected to give rise to future taxable amounts (such as in the case of a foreign currency loan payable which is written down to reflect unrealised foreign exchange gains, such gains being taxable for income tax purposes only when they are realised). AASB 112 and AASB 1020.5.3.1 also include a discussion of the rationale underpinning the requirements in respect of calculating the tax base of such a liability. In addition, the examples provided in AASB 1020 (example 5) illustrating the calculation of the tax base of liabilities that are in the nature of revenue received in advance address a broader range of circumstances than the corresponding example included in AASB 112. 
 
B.4 Tax consequences of the acquisition of an entity 
 
AASB 1020.5.5, 5.5.1 and 6.1.14 contain requirements and guidance on the determination of the tax base of a group of assets and liabilities in circumstances where a transaction or other event gives rise to a separately identifiable tax base for the group, and the assets and liabilities are separately recognised. This occurs where a group of assets and liabilities gives rise to tax consequences that are separate from, and in addition to, those arising from the individual assets and liabilities. An example of such a circumstance is the acquisition of a subsidiary. Because the group financial statements recognise the underlying assets and liabilities of the subsidiary and goodwill arising on consolidation (rather than the parent’s “one-line” investment in the subsidiary), the group financial statements include both the deferred tax balances that are recognised in the subsidiary’s financial statements (adjusted for the tax consequences of fair value adjustments on acquisition of the subsidiary), and the deferred tax balance attributable to the group as a result of the tax base of the parent’s investment in the subsidiary differing from the carrying amount of the subsidiary’s net assets (as recognised in the consolidated financial statements) plus goodwill on consolidation. Although both AASB 112 (Appendix B, example 3) and AASB 1020 (Appendix 2, example 3) include an example illustrating the tax consequences of the acquisition of an entity on consolidated financial statements, AASB 112 does not contain explicit requirements and guidance similar to AASB 1020.5.5, 5.5.1 and 6.1.14. 
 
B.5 Purchased goodwill 
 
Both AASB 112.15 and AASB 1020.6.1 prohibit the recognition of a deferred tax liability for taxable temporary differences arising from the initial recognition of purchased goodwill. Both also include guidance explaining why purchased goodwill may give rise to a deferred tax liability and why recognition of such a liability is prohibited on initial recognition (AASB 112.21 and AASB 1020.6.1.5). AASB 1020.6.1.6 also provides guidance on the recognition of deferred tax liabilities and deferred tax assets arising from purchased goodwill in circumstances where the cost of the purchased goodwill would be deductible for tax purposes depending on the manner in which the entity expects to recover the purchased goodwill. In contrast, AASB 112.21A and 12.21B, in explaining when a deferred tax liability may be recognised subsequent to initial recognition, only specifically contemplate the circumstance where the amortisation of purchased goodwill is deductible for tax purposes. 
 
B.6 Initial recognition of a deferred tax liability 
 
Both AASB 112.15 and AASB 1020.6.1 prohibit, in certain circumstances, the recognition of a deferred tax liability for taxable temporary differences arising from the initial recognition of assets or liabilities. Both also include guidance explaining why recognition of such deferred tax liabilities is prohibited (AASB 112.22(c) and AASB 1020.6.1.8). However, unlike AASB 112, AASB 1020.6.1.8 and example 7 also provide guidance on: 
· the recognition of a deferred tax liability for an asset that, subsequent to initial recognition, is remeasured upwards for accounting purposes with no equivalent adjustment to its tax base, and for which recognition of a deferred tax liability at the time the asset was initially recognised was prohibited; and 
· the recognition of a deferred tax liability for an asset whose tax base changes subsequent to initial recognition, and for which recognition of a deferred tax liability at the time the asset was initially recognised was prohibited. Similar guidance is not included in AASB 112. 
 
B.7 Fair value adjustments on acquisition 
 
Both AASB 112.19 and AASB 1020.6.1.3 provide guidance on why fair value adjustments on the acquisition of an entity or an operation may give rise to recognisable deferred tax liabilities. AASB 1020 (example 6) also includes detailed examples illustrating this together with the effect such deferred tax liabilities have on the determination of goodwill. Similar examples are not included in AASB 112. 
 
B.8 Asset reinstatement 
 
AASB 1020.6.1.9 provides guidance on the recognition of a deferred tax liability that arises on the initial recognition of an asset that is reinstated by capitalising costs expensed in previous reporting periods. Similar guidance is not included in AASB 112. 
 
B.9 Entity not previously subject to income tax 
 
AASB 1020.6.1.10 provides guidance on determining whether the various exceptions to recognising deferred tax liabilities apply where an entity that was not previously subject to income tax becomes subject to income tax. Similar guidance is not included in AASB 112 nor in UIG Interpretation 125 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders. 
 
B.10 Complex corporate structure 
 
AASB 1020.6.1.12 provides guidance on measuring deferred tax liabilities arising from investments in subsidiaries, branches, associates or joint ventures in circumstances where an entity may not be able to calculate the amount of income tax payable if it recovers the carrying amount of its investment other than through immediate sale. Such difficulties in calculation may arise, for example, where a complex corporate structure involves many layers of intermediate parents, providing the group with many alternative ways of recovering an investment (each way having different tax consequences). AASB 112.42 provides similar guidance only in relation to investments in associates. 
 
B.11 Investments in branches 
 
AASB 1020.6.1.16 provides guidance on the recognition by branch operators of deferred tax liabilities arising from investments in branches. Similar guidance is not included in AASB 112. 
 
B.12 Translation of non?monetary assets and liabilities 
 
Both AASB 112.41 and AASB 1020.6.1.19 provide guidance on the recognition of deferred tax liabilities and assets arising from the translation of non?monetary assets and liabilities. However, AASB 1020 (example 8) also includes detailed examples illustrating the tax effects of the translation under different scenarios. Similar examples are not included in AASB 112. 
 
B.13 Compound financial instruments 
 
AASB 112.23 comments, and AASB 1020.6.1(b)(iii) requires, that a deferred tax liability be recognised for taxable temporary differences arising from the initial classification of the equity component of a compound financial instrument separately from the liability component. AASB 1020.6.1.20 and 6.1.21 also provide guidance on determining the taxable temporary differences (if any) arising from compound financial instruments that are simple convertible notes or simple converting notes. Similar guidance is not included in AASB 112. 
 
B.14 Exceptions to the recognition of deferred tax assets 
 
AASB 1020.7.3.2 provides guidance on determining whether the exceptions to the recognition of deferred tax assets apply in certain limited circumstances where the carrying amount of an asset (liability) on initial recognition is less (greater) than its tax base. This might occur, for example, on the initial recognition of a building that is eligible for deductions relating to capital works expenditure or an asset related to water facilities subject to the landcare and water facility offset under Australian income tax law. Similar guidance is not included in AASB 112. 
 
B.15 Utilisation of unused tax losses 
 
Both AASB 112.36 and AASB 1020.7.3.10 provide a list of factors to be considered in assessing the probability that taxable amounts will be available against which unused tax losses can be utilised. Included in the list in AASB 1020.7.3.10 are a number of factors not identified in AASB 112.36. These are: 
· whether existing contracts or firm sales backlog will produce sufficient taxable amounts to realise the deferred tax asset arising from the unused tax losses based on existing sales prices and cost structures; 
· whether there is an excess of unrecognised appreciated asset value over the tax base of the entity’s net assets or an amount sufficient to realise the deferred tax asset arising from the unused tax losses; and 
· whether there is a strong earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than an item resulting from a continuing condition. 
 
B.16 Transfer of tax losses within a group 
 
AASB 1020.7.3.11-7.3.17 and Appendix 3 provide guidance on the accounting for transfers of tax losses within a group. AASB 112 does not address this issue. However, the importance of this issue has diminished significantly following the introduction of the tax consolidation regime, as the loss transfer rules in the Income Tax Assessment Act 1997 no longer apply to most entities. 
 
B.17 Liabilities of the nature of revenue received in advance 
 
Both AASB 112.51 and AASB 1020.4.7 require the measurement of deferred tax liabilities and assets to reflect the tax consequences that would follow from the manner in which the entity expects, as at the reporting date, to recover or settle the carrying amount of its assets and liabilities. However AASB 1020.4.7 and 5.3 include, as an exception to this requirement, the measurement of deferred tax assets or liabilities arising from revenue received in advance. Under AASB 1020.5.3, the tax base of a liability in the nature of revenue received in advance is calculated as the liability’s carrying amount less any amount of the revenue received in advance that has been included in taxable amounts in current or previous reporting periods. A similar exception is not explicitly included in AASB 112. However, it is apparent from the commentary in AASB 112.8 that the measurement of the tax base of a liability in the nature of revenue received in advance under AASB 112 is consistent with its measurement under AASB 1020. 
 
B.18 Changes of expectations 
 
As noted in B.17, both AASB 112.51 and AASB 1020.4.7 require the measurement of deferred tax liabilities and assets to reflect the tax consequences that would follow from the manner in which the entity expects, as at the reporting date, to recover or settle the carrying amount of its assets and liabilities. However, AASB 1020.8.1.1 also comments that, where the entity’s management or governing body changes its expectations about the manner of recovery of an asset, any tax consequence is recognised in the reporting period in which the change occurs. AASB 112 does not explicitly address this issue. 
 
B.19 Indexation of depreciable assets 
 
AASB 1020.8.1.2 provides guidance on the extent to which the benefits of indexation of depreciable assets (such as buildings) under Australian income tax law are derived. AASB 112 does not provide jurisdiction specific guidance. 
 
B.20 Transactions directly to equity – revaluation examples 
 
Both AASB 112.61 and AASB 1020.10.2 require current and deferred tax to be directly debited (credited) to equity if the tax relates to an amount that is or was directly credited (debited) to equity. AASB 1020 (examples 12 and 13) also includes detailed examples illustrating the effect of applying AASB 1020.10.2 in various circumstances involving the revaluation of non-current assets. Similar examples are not included in AASB 112. 
 
B.21 Transactions directly to equity – exceptions – recovery through use 
 
As noted in A.3 and B.20, both AASB 112.61 and AASB 1020.10.2 require current and deferred tax to be directly debited (credited) to equity if the tax relates to an amount that is or was directly credited (debited) to equity. However, AASB 1020.10.4 includes three exceptions to this general rule. Under the second of these exceptions (AASB 1020.10.4(b)), current and deferred tax is recognised as expense or income in profit or loss for the period where the amounts to which the tax relates were directly credited or debited to equity in a previous reporting period and the current and deferred tax arise from the recovery of the carrying amount of an asset through use. This would occur, for example, where an asset which was previously revalued upwards (resulting in the deferred tax effect of the revaluation being recognised as a debit to the asset revaluation reserve) is recovered partially or fully through use, as reflected in depreciation expense. The tax effect that arises in relation to the depreciation, including that part attributable to the revaluation increment, is credited or debited to profit or loss under AASB 1020.10.4(b). AASB 112 does not include an explicit exception to the requirements of AASB 112.61 similar to the exception included in AASB 1020.10.4(b). However, it is apparent from the solution to Example 2 in Appendix B of AASB 112 that requirements consistent with AASB 1020.10.4(b) apply implicitly under AASB 112. In that example, deferred tax arising as a result of a revaluation of buildings is debited to the asset revaluation reserve, while the reversal of the taxable temporary difference arising from the revaluation through the use of the buildings is included as a reduction in deferred tax expense. 
 
B.22 Transactions directly to equity – allocation example 
 
In relation to the recognition of current and deferred tax, both AASB 112.63 and AASB 1020.10.2.3 comment that, in exceptional circumstances, it may be difficult to determine the amount of current and deferred tax that relates to items directly credited or debited to equity. Both also comment that, in such circumstances, the current and deferred tax related to amounts that are directly credited or debited to equity are based on a reasonable pro rata allocation of the current and deferred tax of the entity in the tax jurisdiction concerned, or on another method that achieves a more appropriate allocation in the circumstances. AASB 1020 (example 14) also provides an example illustrating how an appropriate allocation is determined in particular circumstances. A similar example is not included in AASB 112. 
 
B.23 Change in an entity’s tax status 
 
AASB 1020.11.1 explicitly addresses the change in an entity’s tax status from a non-taxed entity to a taxed entity and requires any resultant tax balances to be calculated in accordance with AASB 1020 to the extent practicable. In contrast, AASB 112.1 implicitly addresses this issue in that AASB 112 is applied in accounting for income tax, and changing from a non-taxed entity to a taxed entity would be the time at which AASB 112 is first applied. Further, AASB 112 contains no transitional provisions and therefore relies on the requirements of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors in relation to changes in accounting policies. AASB 108 includes a practicability let-out for changes in accounting policies. 
 
B.24 Set-off 
 
Where the income tax law allows a capital loss only to be used to reduce a current or future capital gain, AASB 1020.12.5 requires deferred tax assets arising from unrealised capital losses or carryforward capital losses to be set?off against deferred tax liabilities only to the extent that the deferred tax liabilities arise from unrealised capital gains. This issue is not explicitly addressed in AASB 112. However, both AASB 112.74 and AASB 1020.12.4 include the general requirement that deferred tax liabilities and deferred tax assets can only be offset to the extent that the entity has a legal right to set?off current tax liabilities and current tax assets, and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend either to settle on a net basis, or to settle the liabilities and realise the assets simultaneously, in each future reporting period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. The outcome of applying this general requirement in circumstances where the income tax law allows a capital loss only to be used to reduce a current or future capital gain is likely to be consistent with the outcome of applying AASB 1020.12.5. 
 
B.25 Exchange differences 
 
Both AASB 121 The Effects of Changes in Foreign Exchange Rates and AASB 1012 Foreign Currency Translation require certain exchange differences to be recognised as income or expense in profit or loss. AASB 112.78 comments that where exchange differences on deferred foreign tax liabilities or assets are recognised in the income statement, such differences may be classified as deferred tax expense (income) if that presentation is considered to be the most useful to financial statement users. The option of classifying such exchange differences as deferred tax expense (income) is not available under AASB 1020. This is because the definition of “deferred tax” included in AASB 1020.15.1 prohibits changes in deferred tax liabilities and assets arising from the translation of deferred tax liabilities and assets of foreign operations from being included in deferred tax. 
 
B.26 Relationship between tax expense (income) and accounting profit 
 
AASB 112.81(c) requires disclosure of an explanation of the relationship between tax expense (income) and accounting profit to be in the form of a numerical reconciliation between tax expense (income) and the product of accounting profit multiplied by the applicable tax rate(s), disclosing also the basis on which the applicable tax rate(s) is (are) computed. AASB 1020.13.2(b) is more restrictive in that it requires the disclosure to use the Australian tax rate(s). AASB 1020.13.3.1 also comments that the relationship between income tax expense (income) and accounting profit may be affected by the receipt of franked dividends (since dividend revenue is not grossed up for the franking credit). Information about franking credits is disclosed as part of the reconciliation required under AASB 1020.13.2(b). AASB 112 does not address this issue. 
 
B.27 Definitions 
 
AASB 1020.15.1 includes definitions for “current tax asset”, “current tax liability”, “deferred tax”, “direct credit to equity” and “direct debit to equity”. In addition, AASB 1020.15.1.7-15.1.8 provides guidance on the types of items recognised as direct credits or direct debits to equity. Similar definitions and guidance are not included in AASB 112. 
 
C. AASB 112 is more detailed or restrictive 
 
C.1 Tax consequences of dividends  
 
Both AASB 112.58 and AASB 1020.10.1 require current and deferred tax to be recognised as an expense or income in profit or loss for the reporting period, except in certain circumstances where it is required to be recognised as a direct debit or credit to equity or as a direct adjustment to goodwill. In addition, both AASB 112.61 and AASB 1020.10.2 require current and deferred tax to be directly debited (or credited) to equity if the tax relates to an amount that is or was directly credited (debited) to equity. AASB 112.52B and AASB 112.65A provide guidance on the application of AASB 112.58 and AASB 112.61 in situations where the entity pays withholding tax on dividends on behalf of shareholders. AASB 1020 does not specifically address this issue. 
 
C.2 Share-based payment transactions 
 
AASB 112.68A-68C deal with the current and deferred tax consequences of share?based payment transactions. AASB 1020 does not specifically address this issue. 
 
D. AASB 1020 disclosures are more extensive 
 
D.1 Significant tax jurisdiction 
 
AASB 1020.13.2(d) requires disclosure for each significant tax jurisdiction of the amount (and expiry date, if any) of deductible temporary differences and unused tax losses for which no deferred tax asset is recognised in the balance sheet. AASB 112.81(e) only requires this information to be disclosed in total rather than for each significant tax jurisdiction. 
 
D.2 Valuation 
 
Where a valuation of an asset or a class of assets has not been recognised in the balance sheet but has been disclosed in the financial report, AASB 1020.13.2(g) requires disclosure of the amount of income tax that has not been recognised but which would be paid if the asset(s) had been sold at the reporting date at the disclosed amount. 
 
D.3 Transferred tax losses 
 
AASB 1020.13.3 requires the following information to be disclosed in respect of transferred tax losses: 
· by the transferor (loss entity), the amount of tax losses that have been transferred and the consideration received or receivable for the losses where they are material in the calculation of income tax expense; and 
· by the transferee (income entity), the amount of tax losses that have been received and the consideration paid or payable for the losses where they are material in the calculation of income tax expense. 
The importance of this disclosure has diminished significantly following the introduction of the tax consolidation regime, as the loss transfer rules in the Income Tax Assessment Act 1997 no longer apply to most entities. 
 
E. AASB 112 disclosures are more extensive 
 
E.1 Tax consequences of dividends 
 
AASB 112.81(i) requires disclosure of the amount of the income tax consequences of dividends to shareholders of the entity that are proposed or declared before the financial report is authorised for issue, but are not recognised as a liability in the financial report. 
 
E.2 Tax rates affected by the distribution of profit or loss or retained earnings 
 
In circumstances where the tax rates applicable to the entity are affected by the distribution of profit or loss or retained earnings, AASB 112.82A requires disclosure of: 
· the nature of the potential income tax consequences that would result from the payment of dividends to its shareholders (this includes the important features of the income tax systems and the factors affecting the amount of the potential income tax consequences); and 
· the amounts of the potential income tax consequences where practicably determinable and whether there are any potential income tax consequences not practicably determinable.