Recoverability of deferred tax assets

Context

The Valdrise group (fictitious entities) manufactures industrial valves and pumps. Valdrise SA, the parent, is based in Lustrania; its subsidiaries are Corvanne SA in Cadoria (loss-making), Arlesque SA in Merovia (acquired on 1 July 20X7) and Valdrise Vescaria in Vescaria (a low-tax country); the four countries are fictitious. You are the preparer of the consolidated tax closing file at 31 December 20X7; the head of consolidation is the reviewer. The financial statements will be authorised on 4 March 20X8. The current tax of Arlesque and Valdrise Vescaria and the deferred tax movements prior to the closing have been recorded; the closing adjustments remain to be made. The tax rules, rates and amounts calculated by the advisers are case data.

Assignment

Recoverability of deferred tax assets (Corvanne).

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

• Assess the recoverability of Corvanne's losses.
• Calculate Corvanne's deferred tax asset, its write-down and the unrecognised losses.
• Record the closing entries.

• MemoScoping memoOpen
• ScheduleValdrise SA tax return workingsOpen
• MemoCorvanne tax memoOpen
• ScheduleSchedule of fixed assets and provisionsOpen
• ContractWarehouse leaseOpen
• DocumentValuation report on the landOpen
• MinutesMinutes of the general meetingOpen
• ContractCorvanne supply contractOpen
• ContractArlesque acquisition fileOpen
• MinutesMinutes of the board on investmentsOpen
• ContractShare option planOpen
• MemoAdvisers' memo on uncertain treatmentsOpen
• MemoPillar Two memoOpen
• ScheduleConsolidation scheduleOpen
• MemoMemo from the chief financial officerOpen
• ExtractExtract from the social reportOpen
• InvoiceInsurance invoiceOpen