3 The directors of Panel, a public limited company, are reviewing the procedures for the c

3 The directors of Panel, a public limited company, are reviewing the procedures for the calculation of the deferred tax

provision for their company. They are quite surprised at the impact on the provision caused by changes in accounting

standards such as IFRS1 ‘First time adoption of International Financial Reporting Standards’ and IFRS2 ‘Share-based

Payment’. Panel is adopting International Financial Reporting Standards for the first time as at 31 October 2005 and

the directors are unsure how the deferred tax provision will be calculated in its financial statements ended on that

date including the opening provision at 1 November 2003.

Required:

(a) (i) Explain how changes in accounting standards are likely to have an impact on the provision for deferred

taxation under IAS12 ‘Income Taxes’. (5 marks)

(a) (i) IAS12 ‘Income Taxes’ adopts a balance sheet approach to accounting for deferred taxation. The IAS adopts a fullprovision approach to accounting for deferred taxation. It is assumed that the recovery of all assets and the settlementof all liabiliti