15.7 Presentation and Disclosure

Income tax expense can be a significant portion of a company’s profit. As such, there are a number of specific presentation and disclosure requirements for income taxes. The requirements include:

• Tax expense (income) from ordinary activities
• Tax expense (income) from discontinued operations
• Tax amounts charged directly to equity and other comprehensive income
• Major components of tax expense (income), including:
  • Deferred tax related to the origination and reversal of temporary differences
  • Deferred tax related to changes in tax rates
  • Current tax amounts related to prior period taxes
  • The benefit arising from the utilization or recognition of previously unrecognized tax losses
  • Amounts of deferred tax asset write-downs
• Details of unrecognized deferred tax assets
• Details of temporary differences and the amount of related deferred tax recognized on the balance sheet
• Reconciliation between the statutory tax rate and the effective tax rate actually realized

There are also specific requirements in IAS 12 and IAS 1 regarding the balance sheet presentation of tax amounts such as: (a) current taxes payable (receivable) should be presented as a current liability (asset); (b) any deferred tax amounts should be presented as non-current assets or liabilities; and (c) current tax assets and liabilities can only offset each other if the company has the legal right to offset them and intends to settle them with a net payment (receipt). This last situation would usually occur when a single taxation authority that allows offset assesses the taxes. A similar prohibition exists against offsetting for deferred taxes, although there is a further condition that allows for offsetting of deferred taxes originated by different entities within a group structure that will experience reversals of temporary differences in a similar fashion or are allowed to offset current tax amounts. In this case, the deferred taxes must still relate to the same taxation authority.