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IAS 12Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5

IAS 12 Income Taxes — wording before IFRS 18Applicable today

Applies to annual periods beginning before January 1, 2027.

WorkpaperIAS 12 — Income TaxesL2 · L3 · L4

Recoverability of deferred tax assets

3 missions12 sections to document45 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

For one taxable entity and taxation authority, list the sources of taxable profit (reversals of taxable differences, future profit excluding reversal deductions, tax planning opportunities), cap the tax losses usable before they expire, assess the convincing evidence when there are recent losses, determine the deferred tax asset recognised and its reduction or reversal at the reporting date, post the entries and prepare the disclosures.

12 sections · 33 blocks · 7 calculations · 2 entries

  • IAS 12 §24
  • IAS 12 §27
  • IAS 12 §27A
  • IAS 12 §28
  • IAS 12 §29
  • IAS 12 §29A
  • IAS 12 §30
  • IAS 12 §34
  • IAS 12 §35
  • IAS 12 §36
  • IAS 12
  • IAS 12 §56
  • IAS 12 §53
  • IAS 12 §81
  • IAS 12

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

3 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Loss-making subsidiary: tax losses, convincing evidence, tax planning and reassessment
Case tasks documented here
  • Calculate the future taxable profit available for the losses, excluding reversal deductions.
  • Calculate the losses usable before they expire and the unrecognised losses.
  • Calculate Ferrandine's gross deferred tax asset and the asset that can be recognised.
  • Calculate the write-down of Ferrandine's deferred tax asset.
  • Reassess Sorbiane Nord's unrecognised losses.
  • Record the entries at 31 December 20X5.
1

Inputs

Inputs

  • Taxable entity, taxation authority and set-off rules (restrictions by type of income, carry-forward periods)

    TextRequired

    FERRANDINE_SEPARATE_TAXABLE_ENTITY

  • History of tax results and facts explaining any recent losses (case data)

    TextRequired

    TAX_LOSSES_20X4_20X5_BUDGETS_MISSED

    IFRS rule: unused tax losses are strong evidence that future profit may not be available (para. 35). Professional judgement: the factors used come from the facts of the case, with no threshold set by this model.

  • Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate

    Number

    660,000

    Carried-forward calculation: deductible differences taken from “Temporary differences schedule” and losses usable before expiry (dedicated calculation) multiplied by the expected rate; no discounting (para. 53).

  • Unused tax losses carried forward (base)

    Number

    3,000,000

  • Probable taxable profits before the losses expire (base)

    Number

    1,200,000

    Case data: carry-forward periods set by the tax law; management assumption: forecast profits, to be supported.

  • Taxable differences of the same authority and entity reversing in the relevant periods (base)

    Number

    600,000

  • Forecast future taxable profit over the relevant periods (base)

    Number

    500,000

  • Deductions from the reversal of deductible temporary differences included in the forecast (base)

    Number

    300,000

  • Taxable profit created by tax planning opportunities (base)

    Number

    400,000

  • Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

    Number

    20 %

  • Deferred tax asset recognised before reassessment

    Number

    450,000

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Sources of taxable profit

Analysis

IAS 12 §24IAS 12 §27IAS 12 §27AIAS 12 §28IAS 12 §29IAS 12 §29AIAS 12 §30

  • Points examined

    ChecklistRequired

    • Asset recognised to the extent that taxable profit is probable
    • Sources relating to the same taxation authority and the same taxable entity
    • Taxable reversals in the period of reversal of the deductible difference or in the carry-back or carry-forward periods
    • Future profit assessed excluding deductions from the reversal of deductible differences
    • Legal restriction on set-off by type of income: assessment only with differences of the same type
    • Recovery of assets above their carrying amount used only on sufficient evidence
    • Planning opportunity: action creating or increasing taxable profit, not a mere reversal of deductible differences
4

Unused tax losses and credits

Analysis

IAS 12 §34IAS 12 §35IAS 12 §36

  • Points examined

    ChecklistRequired

    • Asset on losses and credits carried forward to the extent that future profit will allow their use
    • Recent losses: asset limited to sufficient taxable differences or other convincing evidence
    • Taxable differences producing taxable amounts before the losses or credits expire
5

Reassessment at the reporting date

Analysis

IAS 12IAS 12 §56

  • Points examined

    ChecklistRequired

    • Unrecognised assets reassessed: recognised if they have become recoverable
    • Carrying amount reviewed and reduced if taxable profit is no longer probable
    • Reduction reversed when taxable profit becomes probable again
6

Probable profit, usable losses and asset recognised

Calculations

IAS 12 §24IAS 12 §28IAS 12 §29IAS 12 §34IAS 12 §36IAS 12 §53IAS 12 §56

  • Probable taxable amounts available for losses, after the reversal deductions are absorbed (reversals + future profit − reversal deductions + planning)

    Calculation

    1,200,000

    Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; − Deductions from the reversal of deductible temporary differences included in the forecast (base) ; Taxable profit created by tax planning opportunities (base)

    Teaching presentation assumption: the sources in paras. 28 and 29 are added on a base level; a negative result is brought back to zero. Forecasts are management assumptions of the case.

  • Tax losses usable before expiry (base)

    Calculation

    1,200,000

    Unused tax losses carried forward (base) ; Probable taxable profits before the losses expire (base)

  • Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning)

    Calculation

    1,500,000

    Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; Taxable profit created by tax planning opportunities (base)

  • Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

    Calculation

    300,000

    Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning) ; Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

    IFRS rule: deductible differences are compared with future taxable profit that excludes the tax deductions resulting from their own reversal (para. 29(a)); the tax is therefore computed on the probable taxable amounts before those deductions. Usable losses (dedicated calculation) enter the gross asset, never the sources.

  • Deferred tax asset recognisable at the reporting date

    CalculationRequired

    300,000

    Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate ; Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

  • Reduction of the deferred tax asset

    Calculation

    150,000

    Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

  • Increase in the asset (new recognition or reversal of a reduction)

    Calculation

    0

    Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

7

Journal entries

Entries

  • Reduction of the deferred tax asset

    Entry

    AccountDebitCredit
    Deferred tax expense150,000
    Deferred tax asset150,000

    Teaching assumption: asset arising from items recognised in profit or loss; an asset relating to an item outside profit or loss follows that item (“Deferred tax measurement and allocation”).

  • Recognition or reversal of the deferred tax asset

    Entry

    Debit Deferred tax asset ← Increase in the asset (new recognition or reversal of a reduction) ; Credit Deferred tax income ← Increase in the asset (new recognition or reversal of a reduction)

8

Recoverability and tax planning

Judgment

IAS 12 §24IAS 12 §29IAS 12 §29AIAS 12 §30IAS 12 §34IAS 12 §35IAS 12IAS 12 §56

  • Conclusion on recoverability

    JudgmentRequired

    Asset partly recognised (limited to probable sources)

    Asset recognised in full / Asset partly recognised (limited to probable sources) / No asset recognised (taxable profit not probable)

    Professional judgement, always reasoned: probability of taxable profit, convincing evidence when there are recent losses (para. 35); this model sets no probability threshold.

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

    RECENT_LOSSES_CONVINCING_SOURCES_BEFORE_EXPIRY_ONLY

  • Tax planning opportunities

    JudgmentRequired

    Opportunity retained (realistic action creating taxable profit)

    Opportunity retained (realistic action creating taxable profit) / Rejected: mere reversal of existing deductible differences / No opportunity identified

    Professional judgement: realism of the action and period in which it creates profit; an action that merely reverses deductible differences creates no taxable profit, so it is not an opportunity within para. 30.

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

    LAND_SALE_CREATES_PROFIT_EARLY_PAYMENT_REJECTED

9

Conclusion

Conclusion

  • Reasoned recoverability memo, asset recognised and points submitted to the reviewer

    ConclusionRequired

10

Financial statement impact

FS impact

  • Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

    TableRequired

11

Items passed on to the note

Disclosure

IAS 12 §81IAS 12

  • Information prepared

    ChecklistRequired

    • Deductible differences, unused losses and credits with no asset recognised (amount)
    • Asset recognised by type of difference and of losses or credits
    • Asset depending on future profits or entity with a recent loss: amount and nature of the evidence

  • Draft note: evidence supporting the asset recognised

    TextRequired

    UNRECOGNISED_LOSSES_AND_EVIDENCE_SUPPORTING_ASSET

12

Normative references

References

  • Paragraphs cited in this workpaper (verification status shown from the register)

    References

13

Checks and financial statement impact

  • The conclusion on recoverability is documentedPass
  • The review of planning opportunities is documentedPass
  • The recognisable asset is computedPass
  • The draft note is writtenPass
  • The reduction entry balancesPass
  • The increase entry balancesNot evaluated
Assets
-150,000
Liabilities
0
Profit or loss
-150,000
OCI
0
Equity
-150,000