IAS 12 · Workpapers (Step 4 of 5)
Workpaper assignment
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IAS 12 Income Taxes — wording before IFRS 18Applicable today
Applies to annual periods beginning before January 1, 2027.
Group deferred tax: Sendrevia (Norvania) — losses and options
Acquisition of a foreign subsidiary: deferred tax on the combination, goodwill, investment, share option plan and offsetting
Section 1 of 9
Objective
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
- Expert
- Estimated time
- ≈ 55 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Sendrevia SA (a fictitious entity), a medical equipment group based in Norvania (a fictitious country, 25% tax), acquired on 1 April 20X5 the entire share capital of Kelmora SA, a manufacturer based in Ostralia (a fictitious country, 20% tax). You are preparing the consolidated IFRS financial statements for the year ended 31 December 20X5, authorised on 3 March 20X6. The consolidation team prepared a provisional purchase price allocation without any deferred tax; the chief financial officer wrote a memo of proposals. The tax rules of both countries are case data.
Assignment
Group deferred tax workpaper (acquisition of Kelmora, 20X5).
Purpose of the workpaper
At group level, compute the deferred tax on the fair value adjustments of a business combination and its effect on goodwill, deal with acquired tax benefits recognised after the acquisition, assess the deferred tax on investments (control of the timing of reversal, planned distributions) and on share-based payments (portion in profit or loss and in equity), then the offsetting of deferred tax assets and liabilities; post the entries and prepare the disclosures.
Questions of the file covered by this workpaper
- Which temporary differences arise from the combination? Does goodwill give rise to deferred tax?
- Calculate the deferred tax on the fair value adjustments.
- Calculate goodwill at the acquisition date, including deferred tax.
- How should Kelmora's losses recognised after the acquisition and Sendrevia's losses be treated?
- Calculate the goodwill adjustment for the acquired losses and the closing goodwill.
- Calculate the difference relating to the investment in Kelmora and the part with no deferred tax.
- Calculate the tax on the planned distribution.
- Calculate the estimated future deduction and the deferred tax asset of the share option plan.
- Split this asset between profit or loss and equity.
- Determine the offset presentation of deferred taxes at 31 December 20X5.
- Record the entries for 20X5.
Documents in the file
Open the documents to pick out the relevant information.