CERTYNEX IFRS ACADEMY

Valquessa (profit before tax 2,000,000, tax expense 500,000, applicable rate 25%) opens its reconciliation with 'expected tax: 1,500,000 × 25% = 375,000' and presents an 'other' item of 125,000. Where is the error?

The rate: the previous year's effective rate should have been applied.

The 'other' item is allowed and suffices to explain the gap.

The base: expected tax should have been computed on profit before tax, i.e. 500,000.

The calculation: 1,500,000 × 25% gives 400,000.