Account 347- Deferred income tax payable

a)This account is used for recoding current value and variation situation of increase and decrease in deferred income tax payable. Deferred income tax payable is determined on the basic of taxable temporary difference amounts tax incurred in year and tax rate of current income tax according to following formula:

1.Accounting Principles

In case at the time of recording the deferred income tax payable, there is a change in enterprise income tax rate in the future is known, if refunding deferred income tax payable is in the new tax period which takes effect, tax rate applied to record deferred income tax payable is calculated according to the new tax.

b) Basis of assessment of assets or payable liabilities and temporary differences:

- Basis of assessment of assets shall be deducted from taxable income when recovered the recording value of assets. If the income is not taxable, the basis of charging tax of assets shall be in the book value of such assets. Basis of charging tax of income of liabilities is its recording value which minuses (-) value which shall be deducted from taxable income upon payments of liabilities in future periods. For income received in advance, basis of assessment is its recording value, which minuses the value of non-taxable income in future.

- Temporary differences are the differences between the recording value of assets or liabilities in the Balance Sheet and the basis of charging tax of such assets or liabilities. Temporary differences include two categories: deductible temporary differences and taxable temporary differences. Taxable temporary differences are temporary differences arising income tax payable upon determination of taxable income in the future when the recording value of the assets are recovered or liabilities are paid.

Temporary difference in time is only one of the cases of temporary differences, for example: If accounting profits are recorded in this period but taxable income is calculated in another period.

Temporary differences between book value of assets or liabilities compared to basis of charging tax of such assets or liabilities may not be temporary differences in term of time, for example: When revaluing assets, the book value of the property changes, but if the basis of charging tax does not change, the temporary difference shall arise. However, recovery time of book value and basis of charging tax shall not change; the temporary differences shall not be temporary differences in term of time.

Accountants shall not continue to use the term "permanent differences" to distinguish it from temporary differences when determining the deferred income tax due to asset recovery time or paying liabilities as well as time to deduct assets and liabilities from the taxable income is limited.

c) Deferred income tax payable must be recorded for all taxable temporary differences, unless the deferred income tax payable is raised from the initial record of assets or liabilities of the a transaction which does not affect the accounting profit or income taxable profit (or taxable loss) at the time of transaction incurred.

d) When preparing financial statements, accountants must determine the taxable temporary differences arising in the current year as a basis for determining the deferred income tax payable recorded in current year.

dd) The recording deferred income taxes payable in the year shall comply with under the principle of balancing the deferred income tax payable incurred in current year with deferred income tax payable recorded from previous years but in current year is recorded a decrease (refund), under the following principles:

- If the deferred income tax payable arising during the year is higher than the deferred income tax payable refunded in the year, accountants only record that the addition of deferred income tax payable is the difference between deferred income tax payable arising higher than the deferred income tax payable refunded in the year;

- If deferred income taxes payable incurred in year are less than deferred income taxes refunded in year, accountants only record a decrease (refund) of deferred income taxes being the difference between deferred income taxes payable incurred and deferred income taxes refunded in year;

e) Deferred income taxes payable incurred in year are not related to items recorded directly into owner‘s capital must be recorded as deferred income taxes expenses incurred in year.

g) Accountants must record a decrease in deferred income taxes when temporary taxable differences do not affect to taxable profits (when assets are recovered or liabilities are paid)

h) The offsetting deferred income tax payable and deferred income tax assets shall be only performed during establishment of Balance Sheet, not during recording deferred income tax payable in the accounting books.

2.Structure and contents of account 347 - Deferred income tax payable

Debit side: Deferred income tax payable decreased (refunded) in period

Credit side: Deferred income tax payable recorded in period.

Credit Balance: Deferred income tax payable remained at term-end.

3.Method of accounting for several major transactions

At year-end, accountants shall base on ―Assessment statement of deferred income tax payable‖, to record deferred income tax payable incurred from transactions in year into deferred income tax expenses:

If deferred income taxes payable incurred in year are higher than deferred income taxes payable refunded in year, accountants only record a supplementation of deferred income taxes payable; being the positive difference between deferred income taxes incurred deferred income taxes refunded in year, record:

Dr 8212 - Deferred enterprise income tax expenses

Cr 347 - Deferred income tax payable.

b) If deferred income taxes payables incurred in year are less than deferred income taxes refunded in year, accountants only record a decrease (refund) in deferred income taxes payables being the negative difference between deferred income taxes payable incurred and deferred income taxes refunded in year, record:

Dr 347 - Deferred income tax payable.

Cr 8212 - Deferred enterprise income tax expenses.

Source: Circular 200