CERTYNEX IFRS ACADEMY

The Wenlandor group's 20X5 reconciliation (expected tax 3,000,000, expense 4,100,000) includes: non-deductible expenses +150,000; exempt income −50,000; current-year losses of subsidiaries with no deferred tax asset +1,000,000. Management expects these subsidiaries to remain loss-making for two years. Which explanation should the note highlight?

The non-deductible expenses, the most frequent item in reconciliations.

No explanation: the gap simply results from the arithmetic of the applicable rate.

The exempt income, which reduces the expense.

The subsidiaries' unrecognised losses, the main factor and one likely to persist.