International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards
Page 498
‘possible’, rather than ‘probable’. No amounts have been provided in respect of these items. This predominantly relates
to potential tax penalties and related interest on intercompany loans.
Notwithstanding this risk, the Directors believe that management’s interpretation of the relevant legislation and
assessment of taxation is appropriate and that it is probable that the Group’s tax and customs positions will be
sustained in the event of a challenge by the tax authorities. Consequently, the Directors consider that they have made
adequate provision for any future outflow of resources and no additional provision is required in respect of these
claims or risks.
The disclosures in Extract 29.4 below include information about deductible temporary
differences, unused tax losses and unused tax credits in respect of which no deferred
tax asset has been recognised, together with details of the aggregate amount of
temporary differences associated with its investments in subsidiaries and equity-
accounted entities for which deferred tax liabilities have not been recognised.
[IAS 12.81(e), 81(f)].
Extract 29.4: BP p.l.c. (2017)
Notes on financial statements [extract]
7. Taxation [extract]
Deferred tax [extract]
A summary of temporary differences, unused tax credits and unused tax losses for which deferred tax has not been
recognized is shown in the table below.
$ billion
At 31 December
2017
2016
Unused US state tax lossesa
6.8
9.6
Unused tax losses – other jurisdictionsb
4.5
5.2
Unused tax credits
20.1
19.2
of which
– arising in the UKc
16.3
17.1
– arising in the USd
3.8
2.0
Deductible temporary differencese
31.4
26.7
Taxable temporary differences associated with investments in subsidiaries and equity-
accounted entities
1.6
3.1
Income
taxes
2497
a
These losses expire in the period 2018–2037 with applicable tax rates ranging from 3% to 12%.
b
The majority of the unused tax losses have no fixed expiry date.
c
The UK unused tax credits arise predominantly in overseas branches of UK entities based in jurisdictions with
higher statutory corporate income tax rates than the UK. No deferred tax asset has been recognized on these tax
credits as they are unlikely to have value in the future; UK taxes on these overseas branches are largely mitigated
by double tax relief in respect of overseas tax. These tax credits have no fixed expiry date.
d
The US unused tax credits expire in the period 2018-2027.
e
The majority comprises fixed asset temporary differences in the UK. Substantially all of the temporary
differences have no expiry date.
$ million
Impact of previously unrecognized deferred tax or write-down of deferred tax assets on tax
charge
2017
2016 2015
Current tax benefit relating to the utilization of previously unrecognized deferred tax assets
22
40 123
Deferred tax benefit arising from the reversal of a previous write-down of deferred tax assets
–
269 –
Deferred tax benefit relating to the recognition of previously unrecognized deferred tax assets a
436
394 –
Deferred tax expense arising from the write-down of a previously recognized deferred tax
asset
78
55 768
a
2017 includes the reassessment of prior year deferred tax balances in India in light of changes in facts and
circumstances during the year.
14.6 Discontinued operations – interaction with IFRS 5
IFRS 5 requires the post-tax results of discontinued operations to be shown separately
on the face of the statement of comprehensive income (and any separate income
statement presenting the components of profit or loss). This may be done by giving the
results of discontinued operations after those of continuing operations. This is
discussed further in Chapter 4.
The definitions of income tax, tax expense and taxable profit in IAS 12 (see 3 above) do
not distinguish between the results of continuing and discontinued operations, or the
tax on those results. Thus, as drafted, IAS 12 applies not only to the tax income or
expense on continuing operations (i.e. the amount shown in the ‘tax line’ in the income
statement) but also to any tax income or expense relating to the results of discontinued
operations separately disclosed after those of continuing operations.
However, IFRS 5 clarifies that items accounted for under that standard are not subject
to the disclosure requirements of other standards, other than:
• specific disclosures in respect of non-current assets (or disposal groups) classified
as held for sale or discontinued operations; or
• disclosures about the measurement of assets and liabilities within a disposal group
that are not within the scope of the measurement requirements of IFRS 5, where
such disclosures are not already provided in the other notes to the financial
statements. [IFRS 5.5B].
2498 Chapter 29
References
1 Throughout this Chapter, the tax treatment 18 IFRIC Update, May 2014.
described in examples is purely illustrative, and
19 IFRIC Update, February 2003.
does not necessarily relate to a specific 20 IFRIC Update, May 2007. The IFRIC made its
provision of tax law in a jurisdiction using the
decision based on the then current of IAS 12,
currency in the example.
which referred to ‘joint ventures’ rather than
2
SIC-25,
Income Taxes – Changes in the Tax
‘joint arrangements’.
Status of an Entity or its Shareholders, SIC,
21 SIC-21, Income Taxes – Recovery of Non-
July 2000.
Depreciable Assets, SIC, July 2000, para. 4.
3
IFRIC Update, March 2006.
22 IFRIC Update, July 2016.
4
IFRIC Update, May 2009.
23 IFRIC Update, November 2011.
5
IFRIC Update, September 2017.
24 IFRIC Update, March 2015.
6 Based on a summary in IASB Update, February
25 IFRIC Update, May 2012.
2005.
26 IFRIC Update, May 2012.
7
IFRIC Update, June 2004.
27 IFRIC Update, July 2014.
8 In some cases research and share-based 28 IFRIC Update, July 2014.
payment costs may be included as part of the
29 ED/2009/2, paras. 27(d), B31-B32.
cost of other assets, such as inventories or
30 IFRIC Update, May 2014.
PP&E.
31 IFRIC Update, July 2014.
9
ED/2009/2
– Income Tax, IASB, March 2009,
32 IFRIC Update, July 2014.
Appendix A, definition of ‘tax basis’.
&nb
sp; 33 IFRIC Update, September 2017.
10 ED/2009/2, paras. 20 and 23.
34 IFRIC Update, July 2014.
11 IFRIC Update, June 2018.
35 IFRIC Update, May 2018.
12 IFRIC Update, April 2005.
36 IFRIC Update, January 2016.
13 IFRIC Update, June 2005.
37 IFRIC Update, January 2016.
14 IFRIC Update, June 2018.
38 IFRIC Update, March 2016.
15 IFRIC Update, March 2017.
39 Urgent Issues Group Interpretation 1052 – Tax
16 IFRIC Update, May 2014.
Consolidation Accounting, AASB, as amended
17 IFRIC Update, May 2014.
June 2010.
2499
Chapter 30
Share-based payment
1 INTRODUCTION ........................................................................................... 2513
1.1
Background .......................................................................................................... 2513
1.2
Development of IFRS 2 and amendments to the standard ........................ 2514
1.2.1
IFRS 2 research project ..................................................................... 2515
1.3
Scope of the chapter and referencing convention ...................................... 2516
1.4 Overall
approach
of IFRS 2 .............................................................................. 2516
1.4.1
Classification differences between IFRS 2 and
IAS 32/IFRS 9 ...................................................................................... 2517
2 THE OBJECTIVE AND SCOPE OF IFRS 2 .................................................... 2517
2.1
Objective .............................................................................................................. 2518
2.2 Scope
..................................................................................................................... 2518
2.2.1
Definitions ............................................................................................ 2518
2.2.2 Transactions
within
the scope of IFRS 2 ....................................... 2519
2.2.2.A
Group schemes and transactions with group
shareholders: scope issues .......................................... 2520
2.2.2.B Transactions
with
employee benefit trusts and
similar vehicles ............................................................... 2527
2.2.2.C
Transactions where the identifiable
consideration received appears to be less than
the consideration given ................................................ 2527
2.2.2.D ‘All
employee’
share plans ........................................... 2528
2.2.2.E Vested
transactions
.......................................................
2529
2.2.3
Transactions not within the scope of IFRS 2 ............................... 2529
2.2.3.A
Transactions with shareholders in their
capacity as such ............................................................. 2530
2.2.3.B
Transfer of assets in group restructuring
arrangements ................................................................. 2530
2.2.3.C Business
combinations
.................................................
2530
2500 Chapter 30
2.2.3.D
Common control transactions and formation
of joint arrangements .................................................... 2531
2.2.3.E
Transactions in the scope of IAS 32 and
IFRS 9 ............................................................................... 2531
2.2.3.F
Transactions in financial assets outside the
scope of IAS 32 and IFRS 9 ......................................... 2531
2.2.4
Some practical applications of the scope requirements ............ 2532
2.2.4.A
Remuneration in non-equity shares and
arrangements with put rights over equity
shares ............................................................................... 2532
2.2.4.B
Equity-settled award of subsidiary with put
option against the parent – treatment in
consolidated accounts of parent ................................ 2533
2.2.4.C
Increase in ownership interest with no change
in number of shares held ............................................. 2534
2.2.4.D
Awards for which the counterparty has paid
‘fair value’ ....................................................................... 2534
2.2.4.E
Cash bonus dependent on share price
performance ................................................................... 2535
2.2.4.F
Cash-settled awards based on an entity’s
‘enterprise value’ or other formula .............................. 2535
2.2.4.G
Awards with a foreign currency strike price ........... 2536
2.2.4.H
Holding own shares to satisfy or ‘hedge’
awards .............................................................................. 2537
2.2.4.I
Shares or warrants issued in connection with a
loan or other financial liability ....................................... 2537
2.2.4.J
Options over puttable instruments classified as
equity under specific exception in IAS 32 ................ 2537
2.2.4.K
Special discounts to certain categories of
investor on a share issue.............................................. 2538
3 GENERAL RECOGNITION PRINCIPLES ....................................................... 2539
3.1
Vesting conditions ............................................................................................. 2540
3.1.1
‘Malus’ clauses and clawback conditions ....................................... 2541
3.2
Non-vesting conditions (conditions that are neither service
conditions nor performance conditions) ...................................................... 2542
3.2.1
Background ......................................................................................... 2542
3.2.2
Defining a non-vesting condition ................................................... 2543
3.2.3 Non-compete
agreements
...............................................................
2545
3.3
Vesting period ..................................................................................................... 2546
3.4
Vesting and non-vesting conditions: issues referred to the
Interpretations Committee and the IASB ...................................................... 2547
4 EQUITY-SETTLED TRANSACTIONS – OVERVIEW .................................... 2548
Share-based
payment
2501
4.1
Summary of accounting treatment ................................................................. 2
548
4.2 The
credit
entry
.................................................................................................
2549
5 EQUITY-SETTLED TRANSACTIONS – COST OF AWARDS ........................ 2550
5.1
Cost of awards – overview .............................................................................. 2550
5.2 Transactions
with employees .......................................................................... 2551
5.2.1
Who is an ‘employee’? ....................................................................... 2551
5.2.2
Basis of measurement ....................................................................... 2552
5.3
Grant date ............................................................................................................ 2553
5.3.1
Determination of grant date ............................................................ 2554
5.3.2 Communication
of
awards
to employees and services in
advance of grant date .........................................................................2555
5.3.3
Exercise price or performance target dependent on a
formula or future share price .......................................................... 2556
5.3.4
Exercise price paid in shares (net settlement of award) ............ 2556
5.3.5
Award of equity instruments to a fixed monetary value ............ 2557
5.3.6
Awards over a fixed pool of shares (including ‘last man
standing’ arrangements) ..................................................................... 2557
5.3.7
Awards with multiple service and performance periods ........... 2559
5.3.8
Awards subject to modification by entity after original
grant date ............................................................................................. 2560
5.3.8.A
Significant equity restructuring or transactions ...... 2560