This problem is already solved but can someone please explai

This problem is already solved, but can someone please explain the IFRS/ Tax base difference? I\'d really appreciate any explanation as I can\'t remember this part from my lesson.

s h On jan 18, o1, entiry Relefpfeiler scquires sofwarc for $ 20 miži., which is available for uxe on dhe same day The softrwares uscful lafe is 4 years acconling to IFRS and 5 yean under Relicfpfeiler\'s tax law. Develop all eneries for deferred taxes ??? bose zo 000,0 trte.f.tes IFRS asse Dec 18 15,000 , do? 4. 5,000000 Dec 1 Dec ZO 2? Dec 2 000,00 s 5,od, 4,00, ?? Dec -1,200 000 3d Dec t0

Solution

The number in the IFRS column represent the book value of the respective assets or liabilities.

Tax base represents the value of the asset or liability for tax purpose. Tax base is defined as follows:

Tax base of an asset is the amount, that will be deductible for tax purpose in the future period when the value of the asset is realised. In case the value of the asset, when realised, does not have any tax implication, the tax base is equal to book base. Let me quote 2 simple examples here. In case of fixed assets, the book value may be 100, but tax depreciation rates are different, therefore, future tax allowance for the asset is only 80. 80 will be allowed as a tax deduction. Therefore, tax base of the asset is 80. Deferred tax will be calculated on the difference of book base and tax base, i.e. 100-80. In case of an asset like accouts receivable, when the asset is recovered, there is no tax implication. Therefore, book base is equal to the tax base with no deferred tax implication

In case of liabilities, the tax base of a liability is by default, the book value, less any amount, that will be allowed as a deduction for tax purposes when paid. This typically includes expenses which are allowed for tax purpose on cash basis. In case of revenue received in advance, the tax base will be equal to the revenue which is not taxed in the current year and will be taxed in the future.

Trust this clarifies the concent of deferred tax. Please comment for further clarifications