Tax Assets and Tax Liabilities
Tax assets and tax liabilities should be presented separately from other assets and liabilities in the balance sheet. Deferred tax assets and liabilities should be distinguished from current tax assets and liabilities.
When an enterprise makes a distinction between current and non-current assets and liabilities in its financial statements, it should not classify deferred tax assets (liabilities) as current assets (liabilities).
An enterprise should offset current tax assets and current tax liabilities if, and only if, the enterprise:
has a legally enforceable right to set off the recognised amounts; and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Although current tax assets and liabilities are separately recognised and measured they are offset in the balance sheet subject to criteria similar to those established for financial instruments in FRS 1322004, Financial Instruments: Disclosure and Presentation. An enterprise will normally have a legally enforceable right to set off a current tax asset against a current tax liability when they relate to income taxes levied by the same taxation authority and the taxation authority permits the enterprise to make or receive a single net payment.
In consolidated financial statements, a current tax asset of one enterprise in a group is offset against a current tax liability of another enterprise in the group if, and only if, the enterprises concerned have a legally enforceable right to make or receive a single net payment and the enterprises intend to make or receive such a net payment or to recover the asset and settle the liability simultaneously. However, in the Malaysian tax environment, such a legally enforceable right does not exist. Accordingly, a current tax asset of one enterprise in a group should not be offset against a current tax liability of another enterprise in the group.
An enterprise should offset deferred tax assets and deferred tax liabilities if, and only if:
the enterprise has a legally enforceable right to set off current tax assets against current tax liabilities; and
the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
To avoid the need for detailed scheduling of the timing of the reversal of each temporary difference, this Standard requires an enterprise to set off a deferred tax asset against a deferred tax liability of the same taxable entity if, and only if, they relate to income taxes levied by the same taxation authority and the enterprise has a legally enforceable right to set off current tax assets against current tax liabilities.
In rare circumstances, an enterprise may have a legally enforceable right of set-off, and an intention to settle net, for some periods but not for others. In such rare circumstances, detailed scheduling may be required to establish reliably whether the deferred tax liability of one taxable entity will result in increased tax payments in the same period in which a deferred tax asset of another taxable entity will result in decreased payments by that second taxable entity.
Tax Expense (Income) related to Profit or Loss from Ordinary Activities
The tax expense (income) related to profit or loss from ordinary activities should be presented on the face of the income statement.
Exchange Differences on Deferred Foreign Tax Liabilities or Assets
FRS 1212004, The Effects of Changes in Foreign Exchange Rates, requires certain exchange differences to be recognised as income or expense but does not specify where such differences should be presented in the income statement. Accordingly, where exchange differences on deferred foreign tax liabilities or assets are recognised in the income statement, such differences may be classified as deferred tax expense (income) if that presentation is considered to be the most useful to financial statement users.