Discounting Deferred Tax Liability
FRS 19 Deferred Taxation
Summary Full provision for deferred taxation now required Accelerated capital allowances Pension costs Unrealised group profits Interest costs capatilised Unrelieved tax losses Other short term timing differences Not for: ` Re-valued fixed assets Rollover relief availed of Remittance of overseas sub.
Recognise DT asset if it is more likely than not to be recovered Where assets continually re-valued to fair value: provide DT Permits discounting Use tax rates enacted or substantively enacted Separately disclose where very material Reconciliation of current tax charge Don 't provide DT where FRS 7 adjustment made Applies to all financial statements FRSSE are exempt
Accounting periods ending on or after 23 January 2002 SSAP 15 gone Background and discussion IAS 12 full recognition of DT but uses "temporary differences" rather than "timing differences". Temporary is wider then timing - it includes re-valued fixed assets, and rollover relief No discounting in IAS Three methods of accounting for deferred tax: Flow through: no deferred tax provided for. Full provision: provide DT on all timing differences Partial provision: reflects the tax this is expected to be paid and excludes perm. differences. Anticipate fixed asset purchases and tax planning activities. Partial (SSAP 15) did not deal well with pensions and was inconsistently applied. FAS 109 and other international standards required full provision. All timing differences reverse - in time so why not provide for them. Partial relied on an assessment of what management were going to do. It should be based
on obligations rather then intentions which is consistent with FRS 12. UK were out of step internationally on this point. Move towards full provision in FRS 19. Flow through with disclosure rejected. Volatile results and out of step with IAS and FAS. IAS argued that a fixed asset will general cash flows at least equal to the carrying amount, tax will be payable on these inflows.
Summary Full provision for deferred taxation now required Accelerated capital allowances Pension costs Unrealised group profits Interest costs capatilised Unrelieved tax losses Other short term timing differences Not for: ` Re-valued fixed assets Rollover relief availed of Remittance of overseas sub.
Recognise DT asset if it is more likely than not to be recovered Where assets continually re-valued to fair value: provide DT Permits discounting Use tax rates enacted or substantively enacted Separately disclose where very material Reconciliation of current tax charge Don 't provide DT where FRS 7 adjustment made Applies to all financial statements FRSSE are exempt
Accounting periods ending on or after 23 January 2002 SSAP 15 gone Background and discussion IAS 12 full recognition of DT but uses "temporary differences" rather than "timing differences". Temporary is wider then timing - it includes re-valued fixed assets, and rollover relief No discounting in IAS Three methods of accounting for deferred tax: Flow through: no deferred tax provided for. Full provision: provide DT on all timing differences Partial provision: reflects the tax this is expected to be paid and excludes perm. differences. Anticipate fixed asset purchases and tax planning activities. Partial (SSAP 15) did not deal well with pensions and was inconsistently applied. FAS 109 and other international standards required full provision. All timing differences reverse - in time so why not provide for them. Partial relied on an assessment of what management were going to do. It should be based
on obligations rather then intentions which is consistent with FRS 12. UK were out of step internationally on this point. Move towards full provision in FRS 19. Flow through with disclosure rejected. Volatile results and out of step with IAS and FAS. IAS argued that a fixed asset will general cash flows at least equal to the carrying amount, tax will be payable on these inflows.