Educational material on the application of IAS 12 – Income Taxes

10 May 2022
Accounting
South African Accounting Academy

This document summarises the requirements of IAS 12 Income Taxes and Financial Reporting Pronouncement 1 (FRP 1) with regards to when changes in tax rates announced by the Minister of Finance in his/her delivery of the national budget speech are regarded as being substantively enacted.

It highlights that the announcement by the Minister on 23 February 2022 is substantively enacted and explains the requirements for the change in the tax rate from 28% to 27%.

In terms of paragraphs 46 and 47 of IAS 12, both current and deferred tax assets and liabilities are to be measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Entities are reminded to consider the impact of the above when preparing both interim and annual financial statements.

Click here to download the Educational material:

https://saicawebprstorage.blob.core.windows.net/uploads/resources/Application-of-IAS-12-Income-Taxes-Substantively-Enacted-Tax-Rates.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

In terms of paragraphs 46 and 47 of IAS 12, both current and deferred tax assets and liabilities are to be measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period, which is clarified in this publication.
As an accountant, auditor and independent reviewer, you need to consider your client’s compliance with IAS 12, and the new tax rate. Non-compliance may lead to a modified audit opinion.
As an employer, you also need to comply with ACT in your workplace

Relevance to Your clients:

An entity (company or close corporation) has a duty to comply with their relevant Financial Reporting Framework – whether it be IFRS or IFRS for SMEs.
The accountants compiling the financial statements will benefit from the contents of this educational material.

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