The Grant Thornton International IFRS team has published a revised version of theguide Deferred tax – a Chief Financial Officer’sguide to avoiding the pitfalls. The guide deals with the application of IAS 12 Income Taxesand has been revised to reflect changes made to IAS 12 up to December 31, 2012.
Summary
Income taxes, as defined in IAS 12, include current tax and deferred tax. For many finance executives, the concepts underlying the computation of deferred tax are not intuitive. IAS 12 takes a mechanical approach to the computation but also requires significant judgement in some areas. In addition, applying the concepts of IAS 12 requires a thorough knowledge of the relevant tax laws. For these reasons, many Chief Financial Officers (CFOs) find the calculation of a deferred tax provision causes significant practical difficulties.
The guide is intended for CFOs of businesses that prepare financial statements under IFRS. It illustrates IAS 12's approach to the calculation of deferred tax but is not intended to explain every aspect of the standard in detail. Rather, it summarizes the approach to calculating the deferred tax provision in order to help CFOs prioritize and identify key issues. To assist CFOs with specific application issues, the guide also includes interpretational guidance in certain problematic areas of the deferred tax calculation. The guide includes the following sections
- calculating a deferred tax balance—the basics;
- allocating the deferred tax charge or credit;
- disclosures;
- avoiding pitfalls—the manner of recovery and the blended rate;
- avoiding pitfalls—business combinations and consolidated accounts;
- avoiding pitfalls—share-based payments;
- avoiding pitfalls—recognition of deferred tax assets; and
- avoiding pitfalls—other issues.
