Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p40
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 40/61)
Character Range: 127035–130406

where the carrying amount of an asset or liability is equal to its tax base
1 Accrued expenses have already been deducted in determining an entity's current tax liability for the current or earlier periods.
2 A loan payable is measured at the amount originally received and this amount is the same as the amount repayable on final maturity of the loan.
3 Accrued expenses will never be deductible for tax purposes.
4 Accrued income will never be taxable.

Illustrative computations and presentation
Extracts from statements of financial position and statements of comprehensive income are provided to show the effects on these financial statements of the transactions described below. These extracts do not necessarily conform with all the disclosure and presentation requirements of other Standards.
All the examples below assume that the entities concerned have no transaction other than those described.

Example 1 – Depreciable assets
An entity buys equipment for 10,000 and depreciates it on a straight-line basis over its expected useful life of five years. For tax purposes, the equipment is depreciated at 25% a year on a straight-line basis. Tax losses may be carried back against taxable profit of the previous five years. In year 0, the entity's taxable profit was 5,000. The tax rate is 40%.
The entity will recover the carrying amount of the equipment by using it to manufacture goods for resale. Therefore, the entity's current tax computation is as follows:
                                     Year
                                     1         2         3         4         5

Taxable income                       2,000     2,000     2,000     2,000     2,000
Depreciation for tax purposes        2,500     2,500     2,500     2,500     0
Taxable profit (tax loss)            (500)     (500)     (500)     (500)     2,000
Current tax expense (income) at 40%  (200)     (200)     (200)     (200)     800

The entity recognises a current tax asset at the end of years 1 to 4 because it recovers the benefit of the tax loss against the taxable profit of year 0.
The temporary differences associated with the equipment and the resulting deferred tax asset and liability and deferred tax expense and income are as follows:
                                Year
                                1         2         3         4         5

Carrying amount                 8,000     6,000     4,000     2,000     0
Tax base                        7,500     5,000     2,500     0         0
Taxable temporary difference    500       1,000     1,500     2,000     0

Opening deferred tax liability  0         200       400       600       800
Deferred tax expense (income)   200       200       200       200       (800)
Closing deferred tax liability  200       400       600       800       0

The entity recognises the deferred tax liability in years 1 to 4 because the reversal of the taxable temporary difference will create taxable income in subsequent years. The entity's statement of comprehensive income includes the following:
                               Year
                               1         2         3         4         5

Income                         2,000     2,000     2,000     2,000     2,000
Depreciation                   2,000     2,000     2,000     2,000     2,000
Profit before tax              0         0         0         0