Abstract:
As part of the short-term convergence project on income taxes, the IASB and FASB will consider the appropriate tax rate at which deferred tax assets and liabilities should be recognized. IAS 12 requires an entity to recognize its deferred tax assets and liabilities at the undistributed tax rate, while SFAS 109 generally requires an entity to recognize deferred tax assets and liabilities at the distributed tax rate. The various arguments for and against the use of the distributed tax rate and as it relates in the South African context to Secondary Tax on Companies (STC) are examined. The conclusion can be drawn that it might not always be appropriate to recognize a liability for STC on all distributable profits as they are earned.
