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CORPORATE ACCOUNTING
ABSTRACT
This assignment focuses on the treatment of direct or income tax in the books of accounts as mentioned and the method of how the same can be generalized in the entire economy and the industry so that parity can be brought in the treatment of the same. The company chosen for this assignment is Telstra Corporation Limited which is based in Australia in the telecommunication industry. Various accounting standards have been issued by various countries and also at the international level by the international accounting bodies which have issued standards and regulations from time to time. AASB 112 and IAS 12 are the two most adopted standards regarding this treatment. This assignment is a study of these standards in the annual report of Telstra Corporation Limited.
    Serial Number
    Contents
    Page Number
    1.
    Introduction
    1
    2.
    Concepts
    2-5
    3.
    Criteria for Recognition of deferred tax asset and deferred tax liability
    6
    4.
    Recognition of Tax Expense
    7
    5.
    Accounting Income and Taxable Income
    8
    6.
    Deferred Tax Assets and Deferred Tax Liabilities-Recognized
    9-10
    7.
    Income Tax Payable compared with Income Tax Expenses
    11
    8.
    Income Tax Expense compared with Income Tax Paid
    12
    9.
    Temporary Difference and Permanent Difference
    13
    10.
    Insights
    14
    11.
    Conclusion
    15
    12.
    References
    16-17
INTRODUCTION
Telstra Corporation Limited is a telecommunication company based in Australia, which develops networks, markets voice, and other products and services. Telstra is a completely privatized company originally established in 1901because of the Australian Federation. The company booked a total income of $27.8 billion in 2019 which decreased by 3.6% in comparison to the previous year. The EBIT of the company fell by 21.7% and was at $8 billion in the year 2019. But the net profit after tax decreased the maximum by a fall of 39.6% and was at $2.12 billion. The company paid a total dividend of 16 cents for the year ending 2019.
DEFINITIONS
ACCOUNTING PROFIT
The amount of profit before tax as recognized in the books of accounts by a company in the income statement or the profit or loss account. The amount of accounting profit is calculated using the rules and regulations and recommendations as issued from time to time by various accounting bodies. The amount of profit that has to be recorded in the books is mentioned in the corporations act and the various national and international accounting standards.
For the year ended 30th June 2019, the Profit before Tax for Telstra Group as stated in the financial performance statement is US $ 3,072 million.
TAXABLE PROFIT
The amount of profit which is used for the computation of income tax(IT) is the taxable income. This is calculated using the income tax(IT) laws of the country. The calculation of this figure starts from the amount of profit before tax in the books or PBT and after some addition and deletion as mentioned in the provisions of the act, the amount is calculated on which the income tax is charged (Tran, A., 2015).
TEMPORARY DIFFERENCE
As discussed, the amount of accounting profit is calculated using the corporations act and the accounting rules and policies and the taxable profit on which the income tax(IT) is charged is prepared using the income tax(IT) rules, there will be some difference between them. The difference which is capable of getting reversed in the forthcoming year s is known as the temporary difference(TD) or timing difference as the same is present only for some time.
For example: Borrowing and derivative financial instruments, Provision for employee entitlements, Capital Tax losses
TAXABLE TEMPORARY DIFFERENCE
This is a category of the timing difference wherein the amount of income tax as calculated on the taxable profit is paid more than the amount of tax as calculated on the accounting profit as reflected in the annual report(AR). The amount of profit in the books is more therefore the company as to less income tax in the present year. due to this difference, DTL is created and therefore the company has to be prudent in recording the liabilities in the books. This difference will be reversed in the subsequent years against the profit or loss of the forthcoming years (Wang, Y., Butterfield, S. and Campbell, M., 2016).
DEDUCTIBLE TEMPORARY DIFFERENCE
This is the opposite of the taxable differences discussed above and therefore it leads to the creation of DTA which will be reversed in the subsequent years against the profit or loss of the forthcoming years. Here the amount of income tax as calculated on the taxable profit is paid less than the amount of tax as calculated on the accounting profit as reflected in the annual report(AR). The amount of profit in the books is less therefore the company as to more income tax in the present year. The excess payment leads to future financial benefits due to the past excess payment and therefore an asset is created.
DEFERRED TAX ASSETS
This is created due to the amount that has been paid in excess in the present year as income tax as per the income tax(IT) rules. The amount of income tax that has been paid extra in the current year will be adjusted against the profit or loss of the future years. This is the amount that is recorded as the assets as 'Deferred Tax Asset" and can be either current or non-current based on the duration within which the same can be reversed in the subsequent years (Comprix, J.,...