Accounting Deferred Tax Asset

According to the accounting practice in business, companies will always be levied by the federal through the income tax payable that will become the company’s income tax expense when it is paid. The tax net includes the personal profit, business income, and the capital gain. Referring to Australian Accounting Standard Board (AASB) 112, the income tax expense (income) is not merely equal to current tax liability (asset), but also the function of the deferred tax liabilities and assets (Leo, Hoggett, & Sweeting, 2012). The tax which incurred to a company will depend on the company’s performance. If the company gets a positive taxable income, then the company has to pay 30% of it to the federal. However, if a company suffers a tax loss, the company doesn’t need to pay the tax imposed. The tax loss itself will be carried-forward to the next financial year to reduce the tax liabilities in that period. This paper will elucidate how unused tax losses create deferred tax assets and elaborate if these deferred tax assets satisfy definition and recognition criteria for assets according to the AASB Framework for the Preparation and Presentation of Financial Statements. Additionally, it also discusses whether the deferred tax assets satisfy the definition criteria of asset refer to the Financial Accounting Standard Board (FASB) proposed Conceptual Framework.
AASB 112 Income Taxes specifies the accounting treatment for income taxes become the accounting for the current and future tax consequences of the future settlement of the carrying amount of assets that are recognised in an entity’s statement of financial position or balance sheet and the recognition of deferred tax assets that arise from unused tax losses (Certified Practising Accountants Australia Ltd, 2007). In accordance with AASB 112 paragraph 5, “deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences; the carryforward of unused tax losses;