Income tax of an interim period: estimated annual effective rate, year-to-date and period charge, revision of the rate and entries

• Tax facts: jurisdictions, expected scale, basis of the estimate of the annual rate, events of the period

  TextRequired

  SCALE_20_PERCENT_UP_TO_1000000_AND_30_PERCENT_ABOVE_NOMINAL_RATE_30_PERCENT_ESTIMATED_RATE_26_PERCENT

• Facts supporting a revision of the estimated annual rate: new estimate of the annual profit, change of scale or jurisdiction

  Text

• Estimated annual pre-tax profit

  Number

  2,500,000

• Estimated average annual effective rate (judgment of management)

  Number

  26 %

• Year-to-date pre-tax profit

  Number

  400,000

• Tax expense already recognised in the previous periods of the year

  Number

  0

• Revised average annual effective rate (judgment of management)

  Number

• Documents obtained and referenced (management memo on the estimated rate, profit forecasts, accounts of the period, tax advice)

  EvidenceRequired

IAS 34 §30IAS 34 §B12

• Points examined: income tax of an interim period

  ChecklistRequired

  • Best estimate of the weighted average annual effective rate expected for the year
  • Rate applied to the pre-tax profit of the interim period (year-to-date, then period charge by difference)
  • Nominal statutory rate not substituted for the estimated annual effective rate
  • Progressive scales and jurisdictions taken into account in the estimate of the rate
  • Revision of the rate recognised in the period in which the estimate changes, without restating the published periods
  • Accounting for current and deferred tax within IAS 12 (IAS 12 course)

IAS 34 §30IAS 34 §B12

• Expected annual tax (estimated annual profit × estimated annual effective rate)

  CalculationRequired

  650,000

  Estimated annual pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate)

  CalculationRequired

  104,000

  Year-to-date pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Tax expense of the period (year-to-date expense − expense already recognised)

  Calculation

  104,000

  Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate) ; − Tax expense already recognised in the previous periods of the year

• Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate)

  CalculationRequired

  Year-to-date pre-tax profit ; Revised average annual effective rate (judgment of management)

• Adjustment of the period of revision (year-to-date expense at the revised rate − expense already recognised)

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that increases the tax expense

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that decreases the tax expense

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Entry of the tax expense of the period at the estimated annual rate

  Entry

  Account	Debit	Credit
  Tax expense of the period	104,000
  Income tax payable		104,000

• Entry of the upward adjustment on revision of the rate

  Entry

  Debit Tax expense of the period of revision ← Part of the adjustment that increases the tax expense ; Credit Income tax payable ← Part of the adjustment that increases the tax expense

• Entry of the downward adjustment on revision of the rate

  Entry

  Debit Income tax payable ← Part of the adjustment that decreases the tax expense ; Credit Tax expense of the period of revision ← Part of the adjustment that decreases the tax expense

IAS 34 §30IAS 34 §B12

• Estimated annual effective rate retained

  JudgmentRequired

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions / Rate revised because of a new estimate: adjustment in the period of revision / Not applicable

  Professional judgment: the estimated annual effective rate is case data and an estimate of management, never a rate imposed by the standard; a new estimate changes the charge of the period of revision and not that of the periods already published.

• Rationale: estimated annual profit, scale and jurisdictions taken into account, reason for any revision

  Text

  ESTIMATED_ANNUAL_PROFIT_SCALE_AND_SINGLE_JURISDICTION_GIVE_AN_AVERAGE_RATE_OF_26_PERCENT

• Effect derived from the entries

  Table

• Normative references cited in this workpaper

  References

• Tax facts describedPass
• Estimated annual rate judged and supportedPass
• Tax expense entry balancedPass
• Upward adjustment entry balancedNot evaluated
• Downward adjustment entry balancedNot evaluated
• Year-to-date expense = expense of the period + expense already recognisedPass
• Year-to-date expense at the revised rate = adjustment + expense already recognisedNot evaluated

Assets

0

Liabilities

104,000

Profit or loss

-104,000

OCI

0

Equity

-104,000

• Tax facts: jurisdictions, expected scale, basis of the estimate of the annual rate, events of the period

  TextRequired

  ESTIMATE_OF_THE_ANNUAL_PROFIT_RAISED_TO_5000000_AT_THE_SAME_SCALE

• Facts supporting a revision of the estimated annual rate: new estimate of the annual profit, change of scale or jurisdiction

  Text

  NEW_ESTIMATE_OF_THE_ANNUAL_PROFIT_GIVES_A_RATE_OF_28_PERCENT

• Estimated annual pre-tax profit

  Number

• Estimated average annual effective rate (judgment of management)

  Number

• Year-to-date pre-tax profit

  Number

  1,400,000

• Tax expense already recognised in the previous periods of the year

  Number

  104,000

• Revised average annual effective rate (judgment of management)

  Number

  28 %

• Documents obtained and referenced (management memo on the estimated rate, profit forecasts, accounts of the period, tax advice)

  EvidenceRequired

IAS 34 §30IAS 34 §B12

• Points examined: income tax of an interim period

  ChecklistRequired

  • Best estimate of the weighted average annual effective rate expected for the year
  • Rate applied to the pre-tax profit of the interim period (year-to-date, then period charge by difference)
  • Nominal statutory rate not substituted for the estimated annual effective rate
  • Progressive scales and jurisdictions taken into account in the estimate of the rate
  • Revision of the rate recognised in the period in which the estimate changes, without restating the published periods
  • Accounting for current and deferred tax within IAS 12 (IAS 12 course)

IAS 34 §30IAS 34 §B12

• Expected annual tax (estimated annual profit × estimated annual effective rate)

  CalculationRequired

  Estimated annual pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate)

  CalculationRequired

  Year-to-date pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Tax expense of the period (year-to-date expense − expense already recognised)

  Calculation

  Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate) ; − Tax expense already recognised in the previous periods of the year

• Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate)

  CalculationRequired

  392,000

  Year-to-date pre-tax profit ; Revised average annual effective rate (judgment of management)

• Adjustment of the period of revision (year-to-date expense at the revised rate − expense already recognised)

  Calculation

  288,000

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that increases the tax expense

  Calculation

  288,000

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that decreases the tax expense

  Calculation

  0

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Entry of the tax expense of the period at the estimated annual rate

  Entry

  Debit Tax expense of the period ← Tax expense of the period (year-to-date expense − expense already recognised) ; Credit Income tax payable ← Tax expense of the period (year-to-date expense − expense already recognised)

• Entry of the upward adjustment on revision of the rate

  Entry

  Account	Debit	Credit
  Tax expense of the period of revision	288,000
  Income tax payable		288,000

• Entry of the downward adjustment on revision of the rate

  Entry

  Debit Income tax payable ← Part of the adjustment that decreases the tax expense ; Credit Tax expense of the period of revision ← Part of the adjustment that decreases the tax expense

IAS 34 §30IAS 34 §B12

• Estimated annual effective rate retained

  JudgmentRequired

  Rate revised because of a new estimate: adjustment in the period of revision

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions / Rate revised because of a new estimate: adjustment in the period of revision / Not applicable

  Professional judgment: the estimated annual effective rate is case data and an estimate of management, never a rate imposed by the standard; a new estimate changes the charge of the period of revision and not that of the periods already published.

• Rationale: estimated annual profit, scale and jurisdictions taken into account, reason for any revision

  Text

  THE_REVISION_IS_RECOGNISED_IN_THE_SECOND_QUARTER_AND_THE_FIRST_QUARTER_REPORT_IS_NOT_RESTATED

• Effect derived from the entries

  Table

• Normative references cited in this workpaper

  References

• Tax facts describedPass
• Estimated annual rate judged and supportedPass
• Tax expense entry balancedNot evaluated
• Upward adjustment entry balancedPass
• Downward adjustment entry balancedNot evaluated
• Year-to-date expense = expense of the period + expense already recognisedNot evaluated
• Year-to-date expense at the revised rate = adjustment + expense already recognisedPass

Assets

0

Liabilities

288,000

Profit or loss

-288,000

OCI

0

Equity

-288,000

• Tax facts: jurisdictions, expected scale, basis of the estimate of the annual rate, events of the period

  TextRequired

  ESTIMATE_OF_THE_ANNUAL_PROFIT_LOWERED_TO_2000000_AT_THE_SAME_SCALE

• Facts supporting a revision of the estimated annual rate: new estimate of the annual profit, change of scale or jurisdiction

  Text

  NEW_ESTIMATE_OF_THE_ANNUAL_PROFIT_GIVES_A_RATE_OF_25_PERCENT

• Estimated annual pre-tax profit

  Number

• Estimated average annual effective rate (judgment of management)

  Number

• Year-to-date pre-tax profit

  Number

  1,500,000

• Tax expense already recognised in the previous periods of the year

  Number

  392,000

• Revised average annual effective rate (judgment of management)

  Number

  25 %

• Documents obtained and referenced (management memo on the estimated rate, profit forecasts, accounts of the period, tax advice)

  EvidenceRequired

IAS 34 §30IAS 34 §B12

• Points examined: income tax of an interim period

  ChecklistRequired

  • Best estimate of the weighted average annual effective rate expected for the year
  • Rate applied to the pre-tax profit of the interim period (year-to-date, then period charge by difference)
  • Nominal statutory rate not substituted for the estimated annual effective rate
  • Progressive scales and jurisdictions taken into account in the estimate of the rate
  • Revision of the rate recognised in the period in which the estimate changes, without restating the published periods
  • Accounting for current and deferred tax within IAS 12 (IAS 12 course)

IAS 34 §30IAS 34 §B12

• Expected annual tax (estimated annual profit × estimated annual effective rate)

  CalculationRequired

  Estimated annual pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate)

  CalculationRequired

  Year-to-date pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Tax expense of the period (year-to-date expense − expense already recognised)

  Calculation

  Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate) ; − Tax expense already recognised in the previous periods of the year

• Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate)

  CalculationRequired

  375,000

  Year-to-date pre-tax profit ; Revised average annual effective rate (judgment of management)

• Adjustment of the period of revision (year-to-date expense at the revised rate − expense already recognised)

  Calculation

  -17,000

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that increases the tax expense

  Calculation

  0

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that decreases the tax expense

  Calculation

  17,000

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Entry of the tax expense of the period at the estimated annual rate

  Entry

  Debit Tax expense of the period ← Tax expense of the period (year-to-date expense − expense already recognised) ; Credit Income tax payable ← Tax expense of the period (year-to-date expense − expense already recognised)

• Entry of the upward adjustment on revision of the rate

  Entry

  Debit Tax expense of the period of revision ← Part of the adjustment that increases the tax expense ; Credit Income tax payable ← Part of the adjustment that increases the tax expense

• Entry of the downward adjustment on revision of the rate

  Entry

  Account	Debit	Credit
  Income tax payable	17,000
  Tax expense of the period of revision		17,000

IAS 34 §30IAS 34 §B12

• Estimated annual effective rate retained

  JudgmentRequired

  Rate revised because of a new estimate: adjustment in the period of revision

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions / Rate revised because of a new estimate: adjustment in the period of revision / Not applicable

  Professional judgment: the estimated annual effective rate is case data and an estimate of management, never a rate imposed by the standard; a new estimate changes the charge of the period of revision and not that of the periods already published.

• Rationale: estimated annual profit, scale and jurisdictions taken into account, reason for any revision

  Text

  THE_REVISION_IS_RECOGNISED_IN_THE_THIRD_QUARTER_AND_THE_PUBLISHED_REPORTS_ARE_NOT_RESTATED

• Effect derived from the entries

  Table

• Normative references cited in this workpaper

  References

• Tax facts describedPass
• Estimated annual rate judged and supportedPass
• Tax expense entry balancedNot evaluated
• Upward adjustment entry balancedNot evaluated
• Downward adjustment entry balancedPass
• Year-to-date expense = expense of the period + expense already recognisedNot evaluated
• Year-to-date expense at the revised rate = adjustment + expense already recognisedPass

Assets

0

Liabilities

-17,000

Profit or loss

17,000

OCI

0

Equity

17,000

• Tax facts: jurisdictions, expected scale, basis of the estimate of the annual rate, events of the period

  TextRequired

  TWO_JURISDICTIONS_A_AT_25_PERCENT_AND_B_AT_35_PERCENT_ESTIMATED_RATE_28_PERCENT

• Facts supporting a revision of the estimated annual rate: new estimate of the annual profit, change of scale or jurisdiction

  Text

• Estimated annual pre-tax profit

  Number

  3,000,000

• Estimated average annual effective rate (judgment of management)

  Number

  28 %

• Year-to-date pre-tax profit

  Number

  494,000

• Tax expense already recognised in the previous periods of the year

  Number

• Revised average annual effective rate (judgment of management)

  Number

• Documents obtained and referenced (management memo on the estimated rate, profit forecasts, accounts of the period, tax advice)

  EvidenceRequired

IAS 34 §30IAS 34 §B12

• Points examined: income tax of an interim period

  ChecklistRequired

  • Best estimate of the weighted average annual effective rate expected for the year
  • Rate applied to the pre-tax profit of the interim period (year-to-date, then period charge by difference)
  • Nominal statutory rate not substituted for the estimated annual effective rate
  • Progressive scales and jurisdictions taken into account in the estimate of the rate
  • Revision of the rate recognised in the period in which the estimate changes, without restating the published periods
  • Accounting for current and deferred tax within IAS 12 (IAS 12 course)

IAS 34 §30IAS 34 §B12

• Expected annual tax (estimated annual profit × estimated annual effective rate)

  CalculationRequired

  840,000

  Estimated annual pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate)

  CalculationRequired

  138,320

  Year-to-date pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Tax expense of the period (year-to-date expense − expense already recognised)

  Calculation

  138,320

  Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate) ; − Tax expense already recognised in the previous periods of the year

• Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate)

  CalculationRequired

  Year-to-date pre-tax profit ; Revised average annual effective rate (judgment of management)

• Adjustment of the period of revision (year-to-date expense at the revised rate − expense already recognised)

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that increases the tax expense

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that decreases the tax expense

  Calculation

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Entry of the tax expense of the period at the estimated annual rate

  Entry

  Account	Debit	Credit
  Tax expense of the period	138,320
  Income tax payable		138,320

• Entry of the upward adjustment on revision of the rate

  Entry

  Debit Tax expense of the period of revision ← Part of the adjustment that increases the tax expense ; Credit Income tax payable ← Part of the adjustment that increases the tax expense

• Entry of the downward adjustment on revision of the rate

  Entry

  Debit Income tax payable ← Part of the adjustment that decreases the tax expense ; Credit Tax expense of the period of revision ← Part of the adjustment that decreases the tax expense

IAS 34 §30IAS 34 §B12

• Estimated annual effective rate retained

  JudgmentRequired

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions / Rate revised because of a new estimate: adjustment in the period of revision / Not applicable

  Professional judgment: the estimated annual effective rate is case data and an estimate of management, never a rate imposed by the standard; a new estimate changes the charge of the period of revision and not that of the periods already published.

• Rationale: estimated annual profit, scale and jurisdictions taken into account, reason for any revision

  Text

  THE_PROFIT_MIX_BETWEEN_THE_TWO_JURISDICTIONS_GIVES_AN_AVERAGE_RATE_OF_28_PERCENT

• Effect derived from the entries

  Table

• Normative references cited in this workpaper

  References

• Tax facts describedPass
• Estimated annual rate judged and supportedPass
• Tax expense entry balancedPass
• Upward adjustment entry balancedNot evaluated
• Downward adjustment entry balancedNot evaluated
• Year-to-date expense = expense of the period + expense already recognisedNot evaluated
• Year-to-date expense at the revised rate = adjustment + expense already recognisedNot evaluated

Assets

0

Liabilities

138,320

Profit or loss

-138,320

OCI

0

Equity

-138,320

• Tax facts: jurisdictions, expected scale, basis of the estimate of the annual rate, events of the period

  TextRequired

  LARGE_ORDER_SHIFTING_THE_PROFIT_TOWARDS_JURISDICTION_B

• Facts supporting a revision of the estimated annual rate: new estimate of the annual profit, change of scale or jurisdiction

  Text

  NEW_PROFIT_MIX_GIVES_AN_AVERAGE_RATE_OF_30_PERCENT

• Estimated annual pre-tax profit

  Number

• Estimated average annual effective rate (judgment of management)

  Number

• Year-to-date pre-tax profit

  Number

  1,274,000

• Tax expense already recognised in the previous periods of the year

  Number

  138,320

• Revised average annual effective rate (judgment of management)

  Number

  30 %

• Documents obtained and referenced (management memo on the estimated rate, profit forecasts, accounts of the period, tax advice)

  EvidenceRequired

IAS 34 §30IAS 34 §B12

• Points examined: income tax of an interim period

  ChecklistRequired

  • Best estimate of the weighted average annual effective rate expected for the year
  • Rate applied to the pre-tax profit of the interim period (year-to-date, then period charge by difference)
  • Nominal statutory rate not substituted for the estimated annual effective rate
  • Progressive scales and jurisdictions taken into account in the estimate of the rate
  • Revision of the rate recognised in the period in which the estimate changes, without restating the published periods
  • Accounting for current and deferred tax within IAS 12 (IAS 12 course)

IAS 34 §30IAS 34 §B12

• Expected annual tax (estimated annual profit × estimated annual effective rate)

  CalculationRequired

  Estimated annual pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate)

  CalculationRequired

  Year-to-date pre-tax profit ; Estimated average annual effective rate (judgment of management)

• Tax expense of the period (year-to-date expense − expense already recognised)

  Calculation

  Year-to-date tax expense (year-to-date pre-tax profit × estimated annual effective rate) ; − Tax expense already recognised in the previous periods of the year

• Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate)

  CalculationRequired

  382,200

  Year-to-date pre-tax profit ; Revised average annual effective rate (judgment of management)

• Adjustment of the period of revision (year-to-date expense at the revised rate − expense already recognised)

  Calculation

  243,880

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that increases the tax expense

  Calculation

  243,880

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Part of the adjustment that decreases the tax expense

  Calculation

  0

  Year-to-date tax expense at the revised rate (year-to-date pre-tax profit × revised rate) ; − Tax expense already recognised in the previous periods of the year

• Entry of the tax expense of the period at the estimated annual rate

  Entry

  Debit Tax expense of the period ← Tax expense of the period (year-to-date expense − expense already recognised) ; Credit Income tax payable ← Tax expense of the period (year-to-date expense − expense already recognised)

• Entry of the upward adjustment on revision of the rate

  Entry

  Account	Debit	Credit
  Tax expense of the period of revision	243,880
  Income tax payable		243,880

• Entry of the downward adjustment on revision of the rate

  Entry

  Debit Income tax payable ← Part of the adjustment that decreases the tax expense ; Credit Tax expense of the period of revision ← Part of the adjustment that decreases the tax expense

IAS 34 §30IAS 34 §B12

• Estimated annual effective rate retained

  JudgmentRequired

  Rate revised because of a new estimate: adjustment in the period of revision

  Estimated rate supported by the estimate of the annual profit, the scale and the jurisdictions / Rate revised because of a new estimate: adjustment in the period of revision / Not applicable

  Professional judgment: the estimated annual effective rate is case data and an estimate of management, never a rate imposed by the standard; a new estimate changes the charge of the period of revision and not that of the periods already published.

• Rationale: estimated annual profit, scale and jurisdictions taken into account, reason for any revision

  Text

  THE_REVISION_IS_RECOGNISED_IN_THE_SECOND_QUARTER_AND_THE_FIRST_QUARTER_REPORT_IS_NOT_RESTATED_FOR_THAT_REASON

• Effect derived from the entries

  Table

• Normative references cited in this workpaper

  References

• Tax facts describedPass
• Estimated annual rate judged and supportedPass
• Tax expense entry balancedNot evaluated
• Upward adjustment entry balancedPass
• Downward adjustment entry balancedNot evaluated
• Year-to-date expense = expense of the period + expense already recognisedNot evaluated
• Year-to-date expense at the revised rate = adjustment + expense already recognisedPass

Assets

0

Liabilities

243,880

Profit or loss

-243,880

OCI

0

Equity

-243,880