CERTYNEX IFRS ACADEMY

Glanvire has a taxable difference of 500,000. The rate enacted for the year of reversal is 26%. The leading candidate in next year's election promises to bring it down to 20%; no bill has been tabled. The accountant measured the deferred tax liability at 100,000 (500,000 × 20%). Where is the error?

In the difference: it should have been discounted before applying the rate.

In the choice of a liability: a promised cut turns the difference into an asset.

In the rate: an election promise is neither enacted nor substantively enacted; the liability is 130,000.

In the arithmetic: 500,000 × 20% gives 120,000.