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IAS 12Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5

IAS 12 Income Taxes — wording before IFRS 18Applicable today

Applies to annual periods beginning before January 1, 2027.

Mission · workpaperWorkpaper · IAS 12L3 · Advanced

Documents

Ferrandine's tax position

Schedule

Ferrandine's tax position

Ferrandine's tax position at 31 December 20X5 (enacted rate: 20%). Unused tax losses: 3,000,000, of which 1,000,000 expire on 31 December 20X6 and 2,000,000 expire on 31 December 20X7; the law uses the oldest losses first. Deductible temporary differences (restructuring provisions deductible when paid, expected in 20X6): 300,000. Taxable temporary differences (accelerated tax depreciation): 800,000, of which 600,000 will reverse in 20X6 and 20X7 (300,000 a year) and 200,000 in 20X8; the related deferred tax liability, 160,000, is recognised. Deferred tax asset in the general ledger, unchanged since 31 December 20X4, when it was recognised against deferred tax income: 450,000.

Recoverability of deferred tax assets: Sorbiane Nord at 31 December 20X5

Loss-making subsidiary: tax losses, convincing evidence, tax planning and reassessment

5 documents9 sections to document
0 / 6 sections completed
Guided mode

Section 1 of 9

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IAS 12 workpaper
Level
Advanced
Estimated time
≈ 45 min
Progress
0 / 5 steps done (review excluded)

Context

The Sorbiane group (fictitious) holds two subsidiaries taxed separately, each by the taxation authority of its country, with no tax consolidation. Ferrandine SA, which manufactures castings, incurred tax losses in 20X4 and 20X5. Sorbiane Nord SA, a distributor, has returned to profit over the last two years. For the consolidated financial statements at 31 December 20X5, you are preparing the recoverability review of the deferred tax assets and the related disclosures.

Assignment

Recoverability of deferred tax assets workpaper (Ferrandine, Sorbiane Nord).

Purpose 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.

Questions of the file covered by this workpaper

  • 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.

Documents in the file

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