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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://www.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button] [/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”https://uk.frs102.com/members/premium-toolkit/section-29/” type=”big” color=”red”] Return to Section 29 Home[/button] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]Disclosures
Presentation
Extract from FRS102: Section 29.21-29.27
Allocation in comprehensive income and equity
29.21 An entity shall present changes in a current tax liability (asset) and changes in a deferred tax liability (asset) as tax expense (income) with the exception of those changes arising on the initial recognition of a business combination which shall be dealt with in accordance with paragraph 29.11.
29.22 An entity shall present tax expense (income) in the same component of total comprehensive income (i.e. continuing or discontinued operations, and profit or loss or other comprehensive income) or equity as the transaction or other event that resulted in the tax expense (income).
Presentation in the statement of financial position
29.23 An entity shall present deferred tax liabilities within provisions for liabilities and deferred tax assets within debtors.
29.25 An entity shall disclose information that enables users of its financial statements to evaluate the nature and financial effect of the current and deferred tax consequences of recognised transactions and other events.
29.26 An entity shall disclose separately the major components of tax expense (income). Such components of tax expense (income) may include:
(a) current tax expense (income);
(b) any adjustments recognised in the period for current tax of prior periods;
(c) the amount of deferred tax expense (income) relating to the origination and reversal of timing differences;
(d) the amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes;
(e) adjustments to deferred tax expense (income) arising from a change in the tax status of the entity or its shareholders; and
(f) the amount of tax expense (income) relating to changes in accounting policies and material errors (see Section 10 Accounting Policies, Estimates and Errors).
29.27 An entity shall disclose the following separately:
(a) the aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income or equity;
(b) a reconciliation between:
(i) the tax expense (income) included in profit or loss; and
(ii) the profit or loss on ordinary activities before tax multiplied by the applicable tax rate;
(c) the amount of the net reversal of deferred tax assets and deferred tax liabilities expected to occur during the year beginning after the reporting period together with a brief explanation for the expected reversal;
(d) an explanation of changes in the applicable tax rate(s) compared with the previous reporting period;
(e) the amount of deferred tax liabilities and deferred tax assets at the end of the reporting period for each type of timing difference and the amount of unused tax losses and tax credits;
(f) the expiry date, if any, of timing differences, unused tax losses and unused tax credits; and
(g) in the circumstances described in paragraph 29.14, an explanation of the nature of the potential income tax consequences that would result from the payment of dividends to its shareholders.
OmniPro comment
It is evident from above that the tax note should not show any timing differences within it. A reconciliation of the expected tax charge (i.e. applying the standard rate of tax to the profit before tax) to the total tax charge is required.
Example 61: Extract from the accounting policy note and notes to the financial statements
a) Taxation
The company is managed and controlled in the location and, consequently, is tax resident in location. Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively.
(i) Current tax
Current tax is calculated on the profits of the period. Current tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date.
(ii) Deferred tax
Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements.
Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Current or deferred taxation assets and liabilities are not discounted.
INCLUDE THE BELOW IF CONSOLIDATED FINANCIAL STATEMENTS ARE BEING PREPARED
If a temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting or taxable profit or loss, no deferred tax is recognised. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Extract from notes to the financial statements – tax note
|
|
2015 CU |
2014 CU |
|
|
|
|
|
a) Analysis of tax expense in profit and loss: |
|
|
|
Current tax: |
|
|
|
Irish corporation tax on profit/(loss) on ordinary activities |
XXX |
XXX |
|
Adjustment in respect of prior years |
XXX |
XXX |
|
Foreign tax |
XXX |
XXX |
|
|
XXXX |
XXXX |
|
|
|
|
|
Deferred tax: |
|
|
|
Origination and reversal of timing differences |
|
|
|
Adjustment in respect of prior periods |
|
|
|
Impact of change in tax rate |
XXXX |
XXXX |
|
Tax on profit on ordinary activities (see note 9(c)) |
1,500,000 |
1,000,000 |
(i) During the year the UK capital gains tax rate changed from X% to X% which was substantively enacted on 2016. The year end deferred tax asset/liability has been measured at X% being the tax rate in force at the year end date. The impact of applying the updated rate of x% would result in the deferred tax asset/liability increasing by X%.
|
b) Analysis of tax expense in other comprehensive income: |
|
|
|
Deferred tax: |
|
|
|
Actuarial loss on pension scheme |
XXXX |
– |
|
Impact of change in tax rate |
XXXX |
XXXX |
|
Tax included in other comprehensive income |
XXXX |
XXXX |
- Reconciliation of the expected tax charge at the statutory tax rate to the actual tax charge at the effective rate
The assessed tax charge for the year/period is different to the statutory rate of corporation tax in the Republic of Ireland of 10% (2014: 10%). The differences are explained below:
|
|
2015 CU |
2014 CU |
|
|
|
|
|
|
|
|
|
Profit/(loss) on ordinary activities before tax |
9,463,690 |
XXX |
|
|
|
|
|
Profit/(loss) on ordinary activities multiplied by statutory rate of corporation tax in UK of 10% (2014: 10%) |
946,369 |
XXX |
|
|
|
|
|
Effects of: |
|
|
|
Expenses not deductible for tax purposes |
132,138 |
– |
|
Income taxed at passive rate |
1,349 |
– |
|
Indexation on capital gains |
1,349 |
– |
|
Effect of deferred tax not previously recognised |
(9,280) |
– |
|
Adjustment in respect of prior years |
(9,280) |
– |
|
Other Deferred tax at a higher rate |
3,618 XXX |
– XXX |
|
Higher rate of tax on foreign earnings |
565,875 |
– |
|
|
1,500,000 |
– |
d) Factors that may affect future tax charges
The company has tax losses carried forward of CUXXXX (2014: CUXXX) that are available indefinitely for offset against future taxable profits. The directors have reviewed the potential deferred tax asset of CUXXX at 31 December 2015 (2014: CUXXX) and have concluded that it is inappropriate to recognise it in the company’s balance sheet at this time.
Extract from notes to the financial statements – deferred tax note (balance sheet) classified as Provision for liabilities in the balance sheet
Deferred tax
The deductible and taxable temporary differences at the year/period end dates in respect of
which deferred tax has been recognised are analysed as follows:
|
|
2015 CU |
2014 CU |
|
|
|
|
|
Deferred tax liabilities/(assets) (deductible temporary differences) |
|
|
|
Capital allowances in excess of depreciation |
– |
– |
|
Provisions |
– |
– |
|
Post-employment benefits |
– |
– |
|
Tax losses carried forward |
– |
– |
|
Other deductible temporary differences |
– |
– |
|
|
– |
– |
Movement in deferred tax assets and liabilities, during the year, were as follows:
|
|
Capital allowances |
Provisions |
Tax losses carried forward |
Post- employment benefit |
Other |
Total |
|
CU |
CU |
CU |
CU |
CU |
CU |
|
|
2015 |
|
|
|
|
|
|
|
At 1 January 2015 |
– |
– |
– |
– |
– |
– |
|
Recognised in profit and loss |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
|
Acquisitions |
– |
– |
– |
– |
– |
– |
|
Recognised in other comprehensive income |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
|
Disposals |
– |
– |
– |
– |
– |
– |
|
Foreign exchange and other |
– |
– |
– |
– |
– |
– |
|
At 31 December 2015 |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
|
|
Capital allowances |
Provisions |
Tax losses carried forward |
Post- employment benefit |
Other |
Total |
|
CU |
CU |
CU |
CU |
CU |
CU |
|
|
2014 |
||||||
|
At 1 January 2014 |
– |
– |
– |
– |
– |
– |
|
Recognised in profit and loss |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
|
Acquisitions |
– |
– |
– |
– |
– |
– |
|
Recognised in other comprehensive income |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
|
Disposals |
– |
– |
– |
– |
– |
– |
|
Foreign exchange and other |
– |
– |
– |
– |
– |
– |
|
At 31 December 2014 |
177,328 |
307,132 |
307,132 |
– |
– |
484,460 |
- The net deferred tax liability/asset expected to reverse in the 2016 year is CUXXXX. The reversal relates to the timing difference on tangible fixed assets and capital allowances through depreciation and amortisation. The above amount also incorporates the expected usage of losses carried forward.
- The unused tax losses are as year end as detailed above. There are no unused tax credits. There is no expiry date with regard to these losses.
- No deferred tax is recognised on unremitted profits of its associates as there is no liability to tax on these when remitted.
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