CERTYNEX IFRS ACADEMY

In country M, the subsidiaries Arquevin (deferred tax liability 700,000) and Belcastor (deferred tax asset 260,000) are separate taxable entities that each file and pay their tax, with no group regime or intention to settle net. The group presents a net liability of 440,000, 'both taxes being levied by the same authority'. Where is the error?

No error: a common taxation authority is enough to justify offsetting.

Separate taxable entities with no intention to settle net cannot offset their balances.

Offsetting should have applied to the current tax of the two subsidiaries, not to deferred tax.

The correct net liability is 960,000.