Jones Limited has a year-end of 31 December. When preparing its financial statements for 2012, the accountants estimated that the income tax payable would be 62,000. The liability was settled in 2013 at 65,000. Assume this company pays its tax liabilities on time. Jones bought a piece of machinery for 50,000 on 1 January 2013 which has a useful life of two years and will be scrapped at the end of its life. A first year allowance of 100% is available on this asset. The company earns profits before depreciation of 300,000 each year. Assume the tax rate is 30%.

Required:

a)Prepare the journal entries for the tax expense and payments for the year ended 31 December 2013 and 2014 and show how the company should provide for any movement in deferred tax.

b) Explain the difference between permanent and temporary differences and how they are dealt with for under IAS12.

c) Provide a justification for why IFRS requires full provision of deferred taxation.