Question

Which of the following statements is correct regarding deferred taxes under IFRS?

a. Income tax payable plus or minus the change in deferred income taxes equals income tax expense.
b. The current portion of income tax expense is the amount of change in deferred taxes related to the current period.
c. In computing income tax expense, a company deducts an increase in a deferred tax liability to income tax payable.
d. All of the choices are correct.

Answer 1

The correct statement about deferred taxes under IFRS is that income tax payable adjusted for the change in deferred income taxes equals the income tax expense.

Step-by-step explanation:

The correct statement regarding deferred taxes under IFRS is a. Income tax payable plus or minus the change in deferred income taxes equals income tax expense. This statement is aligned with the concept that the income tax expense reported in the income statement is comprised of the current tax liability and the movements in deferred tax balances.

An increase in a deferred tax liability or a decrease in a deferred tax asset is added to the income tax payable when calculating the income tax expense. Conversely, a decrease in a deferred tax liability or an increase in a deferred tax asset is subtracted from the income tax payable. This process ensures that the tax expense shown in the financial statements reflects both the current and future tax impacts of the company's transactions during the period.