International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards
Page 465
5.1.3
Changes to tax rates and laws enacted after the reporting
date ....................................................................................................... 2362
2334 Chapter 29
5.1.4
Implications of the decision by the UK to withdraw from
the EU .................................................................................................. 2362
5.2
Uncertain tax treatments .................................................................................. 2364
5.3
‘Prior year adjustments’ of previously presented tax balances and
expense (income) ............................................................................................... 2364
5.4
Discounting of current tax assets and liabilities .......................................... 2365
5.5 Intra-period
allocation,
presentation and disclosure ................................. 2365
6 DEFERRED TAX – TAX BASES AND TEMPORARY DIFFERENCES ............ 2365
6.1
Tax base ................................................................................................................2367
6.1.1
Tax base of assets ...............................................................................2367
6.1.2
Tax base of liabilities ........................................................................ 2368
6.1.3
Assets and liabilities whose tax base is not immediately
apparent ............................................................................................... 2369
6.1.4
Tax base of items not recognised as assets or liabilities in
financial statements ........................................................................... 2369
6.1.5
Equity items with a tax base ............................................................ 2370
6.1.6
Items with more than one tax base ................................................ 2370
6.1.7
Tax bases disclaimed or with no economic value ...................... 2370
6.2
Examples of temporary differences ................................................................ 2371
6.2.1
Taxable temporary differences ....................................................... 2371
6.2.1.A
Transactions that affect profit or loss ........................ 2371
6.2.1.B
Transactions that affect the statement of
financial position ............................................................ 2372
6.2.1.C Revaluations
....................................................................
2373
6.2.1.D Tax
re-basing
..................................................................
2374
6.2.1.E
Business combinations and consolidation ................ 2374
6.2.1.F
Foreign currency differences ...................................... 2375
6.2.1.G Hyperinflation
................................................................
2375
6.2.2
Deductible temporary differences .................................................. 2375
6.2.2.A
Transactions that affect profit of loss ........................ 2375
6.2.2.B
Transactions that affect the statement of
financial position ............................................................ 2377
6.2.2.C Revaluations
....................................................................
2377
6.2.2.D
Tax re-basing .................................................................. 2377
6.2.2.E
Business combinations and consolidation ................ 2377
6.2.2.F
Foreign currency differences ..................................... 2378
6.2.3
Assets and liabilities with no temporary difference
(because tax base equals carrying amount) .................................. 2378
7 DEFERRED TAX – RECOGNITION ............................................................. 2379
7.1
The basic principles ...........................................................................................2379
7.1.1
Taxable temporary differences (deferred tax liabilities) ............2379
Income
taxes
2335
7.1.2
Deductible temporary differences (deferred tax assets) .............2379
7.1.3 Interpretation
issues
.......................................................................... 2380
7.1.3.A
Accounting profit .......................................................... 2380
7.1.3.B
Taxable profit ‘at the time of the transaction’......... 2380
7.2
The initial recognition exception ................................................................... 2380
7.2.1
Acquisition of tax losses ................................................................... 2382
7.2.2 Initial
recognition of goodwill ......................................................... 2382
7.2.2.A
Taxable temporary differences .................................. 2382
7.2.2.B
Deductible temporary differences ............................ 2383
7.2.2.C Tax
deductible goodwill .............................................. 2384
7.2.3
Initial recognition of other assets and liabilities .......................... 2384
7.2.4
Changes to temporary differences after initial recognition ...... 2385
7.2.4.A
Depreciation, amortisation or impairment of
initial carrying value ..................................................... 2386
7.2.4.B
Change in carrying value due to revaluation .......... 2387
7.2.4.C
Change in tax base due to deductions in tax
return ............................................................................... 2388
7.2.4.D Temporary
difference altered by legislative
change ............................................................................. 2389
7.2.5
Intragroup transfers of assets with no change in tax base ......... 2390
7.2.6
Partially deductible and super-deductible assets ........................ 2390
7.2.7
Transactions involving the initial recognition of an asset
and liability .......................................................................................... 2394
7.2.7.A
Decommissioning costs ............................................... 2395
7.2.7.B Leases
under
IFRS 16 taxed as operating
leases ............................................................................... 2398
7.2.8
Initial recognition of compound financial instruments by
the issuer ............................................................................................. 2399
7.2.9
Acquisition of subsidiary not accounted for as a business
combination ..................................................................................
...... 2400
7.3
Assets carried at fair value or revalued amount .......................................... 2401
7.4
Restrictions on recognition of deferred tax assets ...................................... 2402
7.4.1
Restrictions imposed by relevant tax laws ................................... 2402
7.4.2
Sources of ‘probable’ taxable profit – taxable temporary
differences ........................................................................................... 2402
7.4.3
Sources of ‘probable’ taxable profit – estimates of future
taxable profits ...................................................................................... 2403
7.4.3.A
Ignore the origination of new future
deductible temporary differences ............................. 2403
7.4.3.B
Ignore the reversal of existing deductible
temporary differences .................................................. 2403
2336 Chapter 29
7.4.4
Tax planning opportunities and the recognition of
deferred tax assets ............................................................................. 2404
7.4.5
Unrealised losses on debt securities measured at fair value ..... 2405
7.4.5.A
The existence of a deductible temporary
difference ....................................................................... 2406
7.4.5.B
Recovering an asset for more than its carrying
amount ............................................................................ 2407
7.4.5.C
Excluding the reversal of existing deductible
temporary differences .................................................. 2407
7.4.5.D
The basis for assessing the recoverability of
deductible temporary differences ................................ 2408
7.4.6
Unused tax losses and unused tax credits ..................................... 2410
7.4.7
Re-assessment of deferred tax assets ............................................. 2411
7.4.7.A
Previously recognised assets ....................................... 2412
7.4.7.B
Previously unrecognised assets ................................... 2412
7.4.8
Effect of disposals on recoverability of tax losses ....................... 2412
7.4.8.A
Tax losses of subsidiary disposed of
recoverable against profits of that subsidiary .......... 2412
7.4.8.B
Tax losses of retained entity recoverable
against profits of subsidiary disposed of ................... 2413
7.4.8.C
Tax losses of subsidiary disposed of
recoverable against profits of retained entity .......... 2413
7.5
‘Outside’ temporary differences relating to subsidiaries, branches,
associates and joint arrangements ................................................................... 2413
7.5.1
Calculation of ‘outside’ temporary differences ............................ 2414
7.5.1.A
Consolidated financial statements .............................. 2416
7.5.1.B
Separate financial statements of investor ................. 2416
7.5.2
Taxable temporary differences ....................................................... 2417
7.5.3
Deductible temporary differences .................................................. 2418
7.5.4 Anticipated
intragroup
dividends in future periods .................... 2418
7.5.4.A
Consolidated financial statements of receiving
entity ................................................................................. 2418
7.5.4.B
Separate financial statements of paying entity ........ 2419
7.5.5
Unpaid intragroup interest, royalties, management
charges etc. .......................................................................................... 2419
7.5.6 Other
overseas
income
taxed only on remittance ....................... 2419
7.6
‘Tax-transparent’ (‘flow-through’) entities .................................................... 2419
7.7 Deferred
taxable
gains
.......................................................................................
2421
8 DEFERRED TAX – MEASUREMENT ........................................................... 2421
8.1
Legislation at the end of the reporting period .............................................. 2421
8.1.1
Changes to tax rates and laws enacted before the
reporting date ..................................................................................... 2422
Income
taxes
2337
8.1.1.A
Managing uncertainty in determining the
effect of new tax legislation ........................................ 2423
8.1.1.B
Backward tracing of changes in deferred
taxation ........................................................................... 2423
8.1.1.C Disclosures
relating to changes in enacted tax
rates and laws ................................................................ 2424
8.1.2
Changes to tax rates and laws enacted after the reporting
date ....................................................................................................... 2424
8.2
Uncertain tax treatments .................................................................................. 2424
8.3
‘Prior year adjustments’ of previously presented tax balances and
expense (income) ............................................................................................... 2424
8.4
Expected manner of recovery of assets or settlement of liabilities ......... 2425
8.4.1
Tax planning strategies to reduce liabilities are not
anticipated ........................................................................................... 2425
8.4.2 Carrying
amount
................................................................................
2425
8.4.3
Assets and liabilities with more than one tax base ..................... 2426
8.4.4
Determining the expected manner of recovery of assets ......... 2427
8.4.5
Depreciable PP&E and intangible assets ...................................... 2427
8.4.6
Non-depreciable PP&E and intangible assets ............................. 2429
8.4.6.A
PP&E accounted for using the revaluation
model ............................................................................... 2429
8.4.6.B
Non-amortised or indefinite-life intangible
assets ................................................................................ 2429
8.4.7
Investment properties........................................................................ 2431
8.4.8 Other
assets
and liabilities ........................
........................................ 2431
8.4.9
‘Outside’ temporary differences relating to subsidiaries,
branches, associates and joint arrangements ............................... 2432
8.4.10 ‘Single
asset’
entities
.......................................................................... 2433
8.4.11
Change in expected manner of recovery of an asset or
settlement of a liability ..................................................................... 2434
8.5
Different tax rates applicable to retained and distributed profits ............ 2434
8.5.1
Effectively tax-free entities ............................................................. 2435
8.5.2
Withholding tax or distribution tax? .............................................. 2436
8.6
Discounting ......................................................................................................... 2436
8.7
Unrealised intragroup profits and losses in consolidated financial
statements ........................................................................................................... 2436
8.7.1
Intragroup transfers of goodwill and intangible assets ............... 2438
8.7.1.A
Individual financial statements of buyer .................. 2438
8.7.1.B
Individual financial statements of seller ................... 2438
8.7.1.C
Consolidated financial statements ............................. 2438
8.7.1.D
When the tax base of goodwill is retained by
the transferor entity...................................................... 2439
2338 Chapter 29
9 UNCERTAIN TAX TREATMENTS ................................................................ 2440
9.1
Scope of IFRIC 23 and definitions used ........................................................ 2441
9.1.1
Business combinations ..................................................................... 2442
9.2
Whether to consider uncertain tax treatments separately (unit of
account) ............................................................................................................... 2443
9.3
Assumptions about the examination of tax treatments (‘detection
risk’) ...................................................................................................................... 2443
9.4
Determining the effect of an uncertain tax treatment or group of
tax treatments ..................................................................................................... 2444