How does Petro Stopping Center recognize income tax in its income statement?
Petro_Stopping_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
Income tax expense represents the sum of current tax and deferred tax.
Income tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case the related tax is recognized in other comprehensive income or directly in equity.
Current tax is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it is determined in accordance with the rules established by the applicable taxation authorities. It therefore excludes items of income or expense that are taxable or deductible in other periods as well as items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences except:
- Where the deferred tax liability arises on the initial recognition of goodwill.
- Where the deferred tax liability arises on the initial recognition of an asset or liability in a transaction that is not a business combination, at the time of the transaction, affects neither accounting profit nor taxable profit or loss and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.
- In respect of taxable temporary differences associated with investments in subsidiaries and associates and interests in joint arrangements, where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Source: Item 23 — RECEIPTS **RECEIPTS (FDD pages 87–131)
What This Means (2025 FDD)
According to Petro Stopping Center's 2025 Franchise Disclosure Document, income tax expense is the sum of current and deferred tax. Petro Stopping Center recognizes income tax in its income statement, unless it relates to items recognized in other comprehensive income or directly in equity. In these cases, the related tax is recognized in other comprehensive income or directly in equity.
Current tax is based on the taxable profit for the period, which differs from the net profit reported in the income statement. This is because taxable profit is determined by the rules of the applicable taxation authorities and excludes items that are taxable or deductible in other periods, or items that are never taxable or deductible. Petro Stopping Center calculates its current tax liability using tax rates and laws enacted or substantively enacted by the balance sheet date.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the balance sheet date. Deferred tax liabilities are recognized for all taxable temporary differences with some exceptions. These exceptions include the initial recognition of goodwill, the initial recognition of an asset or liability in a non-business combination transaction that does not affect accounting profit or taxable profit/loss, and certain investments in subsidiaries, associates, and joint arrangements where the company controls the timing of the reversal of temporary differences.