Deferred tax measurement and allocation: Revalued land

Context

Corbelaine Industries SA (a fictitious entity) manufactures foundry parts and holds a revalued plot of land, a revalued office building, a warehouse let to third parties and a research centre located in a free zone. You are preparing the separate IFRS financial statements for the year ended 31 December 20X4, authorised on 24 February 20X5. The ordinary deferred tax movements of the year have been recorded by the tax department; the closing adjustments remain to be made. The tax rules, rates and amounts are case data.

Assignment

Deferred tax measurement and allocation workpaper (Corbelaine, 20X4).

Purpose of the workpaper

Measure deferred tax at the rate expected on reversal and according to the expected manner of recovery, measure the effect of a change in tax rate and allocate it to profit or loss or to other comprehensive income according to the origin of the differences, recognise the deferred tax on a revaluation, the tax consequences of dividends and the effect of a change in tax status, then reconcile the deferred tax expense in profit or loss with the change in balances.

Questions of the file covered by this workpaper

• Which rates should be used at 31 December 20X4 for deferred tax? Is the capital gains plan taken into account?
• Calculate the effect of the rate change on the differences measured at the standard rate.
• Split this effect between profit or loss and other comprehensive income.
• Calculate the deferred tax on the revalued land and the revaluation surplus net of tax.
• On which manner of recovery is the deferred tax on the warehouse measured?
• Calculate the deferred tax on the warehouse and the adjustment to the recorded liability.
• Calculate the withholding tax and the net dividend payable to shareholders.
• Analyse the loss of the free-zone status: amount and allocation of the effect.
• Record the entries at 31 December 20X4.

• MemoTax department memo on ratesOpen
• ScheduleSchedule of temporary differences at the standard rateOpen
• DocumentValuation report on the landOpen
• MemoMemo on the Saint-Abeline warehouseOpen
• MinutesMinutes of the general meetingOpen
• MemoLegal memo on the free zoneOpen
• ExtractExtract from the purchasing budgetOpen