IAS 34 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
- Case studies
- Workpapers
- Exams
Income tax of an interim period: estimated annual effective rate, year-to-date and period charge, revision of the rate and entries: First quarter — estimated rate
Interim income tax: estimated annual effective rate, year-to-date and period charge, and revision of the rate during the year
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 34 workpaper
- Level
- Advanced
- Estimated time
- ≈ 75 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Verdane SA (fictitious entity), a maker of electronic boards, closes its accounts on 31 December and publishes a report at the end of each quarter. You follow the income tax expense of the first three quarters of 20X6. Management first estimates an annual effective rate of 26%, revises it to 28% in the second quarter when it raises its estimate of the annual profit, then to 25% in the third quarter when it lowers it. You must compute the expenses and record the entries of each quarter without restating the reports already published.
Assignment
Interim tax expense and revisions of the estimated annual rate
Purpose of the workpaper
Record the estimated annual pre-tax profit, the estimated average annual effective rate of management (scale, jurisdictions), the year-to-date pre-tax profit and the charge already recognised. Compute the year-to-date charge at the estimated rate, the charge of the period and, if the rate is revised, the year-to-date charge at the revised rate and the adjustment recognised in the period of revision; periods already published are not restated. The rate is case data and a judgment of management; it is never presented as imposed by the standard. The entry is illustrative and excludes deferred tax.
Questions of the file covered by this workpaper
- Compute the expected annual tax at the estimated annual effective rate.
- Compute the year-to-date tax expense of the first quarter.
- Compute the tax expense of the first quarter.
- Record the tax expense of the first quarter.
- Second quarter: compute the year-to-date expense at the revised rate.
- Second quarter: compute the adjustment recognised in the period of revision.
- Record the adjustment of the second quarter.
- Third quarter: compute the year-to-date expense at the revised rate.
- Third quarter: compute the adjustment recognised in the period of revision.
- Record the adjustment of the third quarter.
Documents in the file
Open the documents to pick out the relevant information.