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AASB 112 - Income Taxes
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Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
Articles 
AASB website 

 
Petroleum Resource Rent Tax 
As reported in AASB Action Alert (from 13-14 December 2006 Meeting)  
 
The Board discussed the submissions received in relation to its agenda rejection statement on Petroleum Resource Rent Tax (PRRT), which it agreed at its October meeting. That statement, published on the AASB website under "Items not taken onto the Agenda", gave the Board's view that PRRT is within the scope of AASB 112 Income Taxes. 
 
The Board decided to revise the agenda rejection statement to remove the statement that PRRT is within the scope of AASB 112 and agreed to appoint an advisory panel to recommend to the Board whether PRRT should or should not be accounted for as an income tax under AASB 112. The panel's recommendation will be published on the AASB website to allow constituents to make submissions. The Board will then consider the panel's recommendation and any submissions to determine how it should proceed on this issue. 
 
 
UIG Tax Consolidation Accounting 
As reported in ANT29/2005: 
 
Q: UIG Interpretation 1052 Tax Consolidation Accounting seems to change significantly the way to account for inter-entity tax balances. Is this true? Does this mean consolidated groups need to change their tax funding agreements? 
 
A: Yes, it is correct that UIG Interpretation 1052 has changed the way that consolidated groups account for inter-entity tax balances. Previously, under UIG Abstract 52, only Tax Funding Arrangement ("TFA") assets and liabilities were recognised as inter-entity balances whilst TFA expenses and revenues were recognised as a component of income tax expense or revenue. UIG Interpretation 1052 instead recognises all TFA amounts as inter-entity balances. This is relevant in the context of another significant change under UIG Interpretation 1052; each subsidiary in a tax-consolidated group is now required to recognise its own current and deferred taxes. 
 
A number of methods by which this may be done are identified in UIG Interpretation 1052. Each subsidiary's current tax liability (asset) and any deferred tax asset arising from tax losses are then transferred to the head entity. Differences between the amounts transferred and amounts contributed under a TFA will be recognised in equity. Consolidated groups that wish to avoid this treatment may wish to consider modifications to TFAs so that contributions by subsidiaries match the tax amounts that are transferred to the head entity. 
 
However, a consolidated group may need to take into account other factors before changing its TFAs. For example, there may be commercial or other considerations that were relevant to the drafting of the TFAs in the first place. 
 
 
Tax Effect of Revaluations 
As reported in ANT11/2005: 
 
Q: Does revaluing an asset create a temporary difference under the new AASB 112 “Income Taxes”? 
 
A: Yes. Where an asset is revalued for accounts purposes but not for tax purposes, a temporary difference is created under the new AASB 112 that will need to be tax affected. This is because temporary differences are calculated by comparing the tax base of an asset (ie. without the revaluation) with the carrying amount for accounts purposes (including the revaluation if the asset is at fair value). Paragraph 20 of AASB 112 explains the reasoning in more detail. 
 
This is different from the treatment under the 1989 version of AASB 1020 where asset revaluations did not create timing differences. 
 
 
Will the real tax effect accounting standard please stand up? 
As reported in ANT44/2004: 
 
Q: The new handbook has four tax standards: ASRB1020 (1989 version), AASB 1020 (1999 version), AASB 1020 A and B and now the new AASB 112. What is the difference and why are they all still there? 
 
A: In 1999 the AASB issued a revised version of the tax standard which moved from a profit and loss based tax standard (AASB 1020, 1989 version) to a balance sheet based standard (AASB 1020, 1999 version) in line with the developments in tax effect accounting overseas, in particular IAS 12 - the equivalent international standard.  
 
Because the standard was such a significant change for Australia, the original implementation date of financial years ending on or after June 2003 was deferred by AASB 1020A to June 2004 and then again by AASB 1020B to December 2005. Its implementation was finally overtaken by the broader international convergence programme the Board subsequently adopted and the issue of AASB 112. Preparers of financial statements did and still do have the option of adopting AASB 1020 (1999) early if they choose. 
 
The release of AASB 112, which is the new Australian equivalent IFRS standard on accounting for income tax, effectively means that AASB 1020 (1999) will be superseded before it becomes operative (apart from companies that chose to early-adopt the revised AASB 1020). Page 54 of June 2004 Charter "Impact of the new tax standard" explains the current position in more detail and the likely impact that adopting the new tax standard will have.