Tax note and effective tax rate reconciliation

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

Tax note and reconciliation (Valdrise group).

Purpose of the workpaper

Reconcile the tax expense with its components, compute the expected tax at the applicable rate and reconcile it with the reported tax expense (permanent differences, rate differences, unrecognised losses, prior period adjustments), prepare the roll-forward of net deferred tax, assess the offset presentation and the Pillar Two disclosures, then draft the tax note.

Questions of the file covered by this workpaper

• Conclude on the uncertain treatments and on Pillar Two.
• Determine tax expense, its reconciliation and the deferred tax movement schedule.
• Write the conclusion of the file and answer the chief financial officer.

• 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