Recoverability of deferred tax assets

• Taxable entity, taxation authority and set-off rules (restrictions by type of income, carry-forward periods)

  TextRequired

  FERRANDINE_SEPARATE_TAXABLE_ENTITY

• History of tax results and facts explaining any recent losses (case data)

  TextRequired

  TAX_LOSSES_20X4_20X5_BUDGETS_MISSED

  IFRS rule: unused tax losses are strong evidence that future profit may not be available (para. 35). Professional judgement: the factors used come from the facts of the case, with no threshold set by this model.

• Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate

  Number

  660,000

  Carried-forward calculation: deductible differences taken from “Temporary differences schedule” and losses usable before expiry (dedicated calculation) multiplied by the expected rate; no discounting (para. 53).

• Unused tax losses carried forward (base)

  Number

  3,000,000

• Probable taxable profits before the losses expire (base)

  Number

  1,200,000

  Case data: carry-forward periods set by the tax law; management assumption: forecast profits, to be supported.

• Taxable differences of the same authority and entity reversing in the relevant periods (base)

  Number

  600,000

• Forecast future taxable profit over the relevant periods (base)

  Number

  500,000

• Deductions from the reversal of deductible temporary differences included in the forecast (base)

  Number

  300,000

• Taxable profit created by tax planning opportunities (base)

  Number

  400,000

• Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  Number

  20 %

• Deferred tax asset recognised before reassessment

  Number

  450,000

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 12 §24IAS 12 §27IAS 12 §27AIAS 12 §28IAS 12 §29IAS 12 §29AIAS 12 §30

• Points examined

  ChecklistRequired

  • Asset recognised to the extent that taxable profit is probable
  • Sources relating to the same taxation authority and the same taxable entity
  • Taxable reversals in the period of reversal of the deductible difference or in the carry-back or carry-forward periods
  • Future profit assessed excluding deductions from the reversal of deductible differences
  • Legal restriction on set-off by type of income: assessment only with differences of the same type
  • Recovery of assets above their carrying amount used only on sufficient evidence
  • Planning opportunity: action creating or increasing taxable profit, not a mere reversal of deductible differences

IAS 12 §34IAS 12 §35IAS 12 §36

• Points examined

  ChecklistRequired

  • Asset on losses and credits carried forward to the extent that future profit will allow their use
  • Recent losses: asset limited to sufficient taxable differences or other convincing evidence
  • Taxable differences producing taxable amounts before the losses or credits expire

IAS 12IAS 12 §56

• Points examined

  ChecklistRequired

  • Unrecognised assets reassessed: recognised if they have become recoverable
  • Carrying amount reviewed and reduced if taxable profit is no longer probable
  • Reduction reversed when taxable profit becomes probable again

IAS 12 §24IAS 12 §28IAS 12 §29IAS 12 §34IAS 12 §36IAS 12 §53IAS 12 §56

• Probable taxable amounts available for losses, after the reversal deductions are absorbed (reversals + future profit − reversal deductions + planning)

  Calculation

  1,200,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; − Deductions from the reversal of deductible temporary differences included in the forecast (base) ; Taxable profit created by tax planning opportunities (base)

  Teaching presentation assumption: the sources in paras. 28 and 29 are added on a base level; a negative result is brought back to zero. Forecasts are management assumptions of the case.

• Tax losses usable before expiry (base)

  Calculation

  1,200,000

  Unused tax losses carried forward (base) ; Probable taxable profits before the losses expire (base)

• Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning)

  Calculation

  1,500,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; Taxable profit created by tax planning opportunities (base)

• Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

  Calculation

  300,000

  Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning) ; Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  IFRS rule: deductible differences are compared with future taxable profit that excludes the tax deductions resulting from their own reversal (para. 29(a)); the tax is therefore computed on the probable taxable amounts before those deductions. Usable losses (dedicated calculation) enter the gross asset, never the sources.

• Deferred tax asset recognisable at the reporting date

  CalculationRequired

  300,000

  Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate ; Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

• Reduction of the deferred tax asset

  Calculation

  150,000

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Increase in the asset (new recognition or reversal of a reduction)

  Calculation

  0

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Reduction of the deferred tax asset

  Entry

  Account	Debit	Credit
  Deferred tax expense	150,000
  Deferred tax asset		150,000

  Teaching assumption: asset arising from items recognised in profit or loss; an asset relating to an item outside profit or loss follows that item (“Deferred tax measurement and allocation”).

• Recognition or reversal of the deferred tax asset

  Entry

  Debit Deferred tax asset ← Increase in the asset (new recognition or reversal of a reduction) ; Credit Deferred tax income ← Increase in the asset (new recognition or reversal of a reduction)

IAS 12 §24IAS 12 §29IAS 12 §29AIAS 12 §30IAS 12 §34IAS 12 §35IAS 12IAS 12 §56

• Conclusion on recoverability

  JudgmentRequired

  Asset partly recognised (limited to probable sources)

  Asset recognised in full / Asset partly recognised (limited to probable sources) / No asset recognised (taxable profit not probable)

  Professional judgement, always reasoned: probability of taxable profit, convincing evidence when there are recent losses (para. 35); this model sets no probability threshold.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  RECENT_LOSSES_CONVINCING_SOURCES_BEFORE_EXPIRY_ONLY

• Tax planning opportunities

  JudgmentRequired

  Opportunity retained (realistic action creating taxable profit)

  Opportunity retained (realistic action creating taxable profit) / Rejected: mere reversal of existing deductible differences / No opportunity identified

  Professional judgement: realism of the action and period in which it creates profit; an action that merely reverses deductible differences creates no taxable profit, so it is not an opportunity within para. 30.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  LAND_SALE_CREATES_PROFIT_EARLY_PAYMENT_REJECTED

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 12 §81IAS 12

• Information prepared

  ChecklistRequired

  • Deductible differences, unused losses and credits with no asset recognised (amount)
  • Asset recognised by type of difference and of losses or credits
  • Asset depending on future profits or entity with a recent loss: amount and nature of the evidence

• Draft note: evidence supporting the asset recognised

  TextRequired

  UNRECOGNISED_LOSSES_AND_EVIDENCE_SUPPORTING_ASSET

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The conclusion on recoverability is documentedPass
• The review of planning opportunities is documentedPass
• The recognisable asset is computedPass
• The draft note is writtenPass
• The reduction entry balancesPass
• The increase entry balancesNot evaluated

Assets

-150,000

Liabilities

0

Profit or loss

-150,000

OCI

0

Equity

-150,000

• Taxable entity, taxation authority and set-off rules (restrictions by type of income, carry-forward periods)

  TextRequired

  SORBIANE_NORD_SEPARATE_TAXABLE_ENTITY

• History of tax results and facts explaining any recent losses (case data)

  TextRequired

  TAXABLE_PROFITS_20X4_20X5

  IFRS rule: unused tax losses are strong evidence that future profit may not be available (para. 35). Professional judgement: the factors used come from the facts of the case, with no threshold set by this model.

• Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate

  Number

  100,000

  Carried-forward calculation: deductible differences taken from “Temporary differences schedule” and losses usable before expiry (dedicated calculation) multiplied by the expected rate; no discounting (para. 53).

• Unused tax losses carried forward (base)

  Number

  400,000

• Probable taxable profits before the losses expire (base)

  Number

  950,000

  Case data: carry-forward periods set by the tax law; management assumption: forecast profits, to be supported.

• Taxable differences of the same authority and entity reversing in the relevant periods (base)

  Number

• Forecast future taxable profit over the relevant periods (base)

  Number

  950,000

• Deductions from the reversal of deductible temporary differences included in the forecast (base)

  Number

• Taxable profit created by tax planning opportunities (base)

  Number

• Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  Number

  25 %

• Deferred tax asset recognised before reassessment

  Number

  0

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 12 §24IAS 12 §27IAS 12 §27AIAS 12 §28IAS 12 §29IAS 12 §29AIAS 12 §30

• Points examined

  ChecklistRequired

  • Asset recognised to the extent that taxable profit is probable
  • Sources relating to the same taxation authority and the same taxable entity
  • Taxable reversals in the period of reversal of the deductible difference or in the carry-back or carry-forward periods
  • Future profit assessed excluding deductions from the reversal of deductible differences
  • Legal restriction on set-off by type of income: assessment only with differences of the same type
  • Recovery of assets above their carrying amount used only on sufficient evidence
  • Planning opportunity: action creating or increasing taxable profit, not a mere reversal of deductible differences

IAS 12 §34IAS 12 §35IAS 12 §36

• Points examined

  ChecklistRequired

  • Asset on losses and credits carried forward to the extent that future profit will allow their use
  • Recent losses: asset limited to sufficient taxable differences or other convincing evidence
  • Taxable differences producing taxable amounts before the losses or credits expire

IAS 12IAS 12 §56

• Points examined

  ChecklistRequired

  • Unrecognised assets reassessed: recognised if they have become recoverable
  • Carrying amount reviewed and reduced if taxable profit is no longer probable
  • Reduction reversed when taxable profit becomes probable again

IAS 12 §24IAS 12 §28IAS 12 §29IAS 12 §34IAS 12 §36IAS 12 §53IAS 12 §56

• Probable taxable amounts available for losses, after the reversal deductions are absorbed (reversals + future profit − reversal deductions + planning)

  Calculation

  950,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; − Deductions from the reversal of deductible temporary differences included in the forecast (base) ; Taxable profit created by tax planning opportunities (base)

  Teaching presentation assumption: the sources in paras. 28 and 29 are added on a base level; a negative result is brought back to zero. Forecasts are management assumptions of the case.

• Tax losses usable before expiry (base)

  Calculation

  400,000

  Unused tax losses carried forward (base) ; Probable taxable profits before the losses expire (base)

• Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning)

  Calculation

  950,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; Taxable profit created by tax planning opportunities (base)

• Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

  Calculation

  237,500

  Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning) ; Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  IFRS rule: deductible differences are compared with future taxable profit that excludes the tax deductions resulting from their own reversal (para. 29(a)); the tax is therefore computed on the probable taxable amounts before those deductions. Usable losses (dedicated calculation) enter the gross asset, never the sources.

• Deferred tax asset recognisable at the reporting date

  CalculationRequired

  100,000

  Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate ; Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

• Reduction of the deferred tax asset

  Calculation

  0

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Increase in the asset (new recognition or reversal of a reduction)

  Calculation

  100,000

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Reduction of the deferred tax asset

  Entry

  Debit Deferred tax expense ← Reduction of the deferred tax asset ; Credit Deferred tax asset ← Reduction of the deferred tax asset

  Teaching assumption: asset arising from items recognised in profit or loss; an asset relating to an item outside profit or loss follows that item (“Deferred tax measurement and allocation”).

• Recognition or reversal of the deferred tax asset

  Entry

  Account	Debit	Credit
  Deferred tax asset	100,000
  Deferred tax income		100,000

IAS 12 §24IAS 12 §29IAS 12 §29AIAS 12 §30IAS 12 §34IAS 12 §35IAS 12IAS 12 §56

• Conclusion on recoverability

  JudgmentRequired

  Asset recognised in full

  Asset recognised in full / Asset partly recognised (limited to probable sources) / No asset recognised (taxable profit not probable)

  Professional judgement, always reasoned: probability of taxable profit, convincing evidence when there are recent losses (para. 35); this model sets no probability threshold.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  RETURN_TO_PROFIT_FIRM_ORDERS_NO_EXPIRY

• Tax planning opportunities

  JudgmentRequired

  No opportunity identified

  Opportunity retained (realistic action creating taxable profit) / Rejected: mere reversal of existing deductible differences / No opportunity identified

  Professional judgement: realism of the action and period in which it creates profit; an action that merely reverses deductible differences creates no taxable profit, so it is not an opportunity within para. 30.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  NO_PLANNING_NEEDED

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 12 §81IAS 12

• Information prepared

  ChecklistRequired

  • Deductible differences, unused losses and credits with no asset recognised (amount)
  • Asset recognised by type of difference and of losses or credits
  • Asset depending on future profits or entity with a recent loss: amount and nature of the evidence

• Draft note: evidence supporting the asset recognised

  TextRequired

  PREVIOUSLY_UNRECOGNISED_LOSSES_NOW_RECOGNISED

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The conclusion on recoverability is documentedPass
• The review of planning opportunities is documentedPass
• The recognisable asset is computedPass
• The draft note is writtenPass
• The reduction entry balancesNot evaluated
• The increase entry balancesPass

Assets

100,000

Liabilities

0

Profit or loss

100,000

OCI

0

Equity

100,000

• Taxable entity, taxation authority and set-off rules (restrictions by type of income, carry-forward periods)

  TextRequired

  CORVANNE_SA_CADORIAN_TAX_AUTHORITY

• History of tax results and facts explaining any recent losses (case data)

  TextRequired

  RECENT_LOSSES_BUDGETS_NOT_MET

  IFRS rule: unused tax losses are strong evidence that future profit may not be available (para. 35). Professional judgement: the factors used come from the facts of the case, with no threshold set by this model.

• Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate

  Number

  600,000

  Carried-forward calculation: deductible differences taken from “Temporary differences schedule” and losses usable before expiry (dedicated calculation) multiplied by the expected rate; no discounting (para. 53).

• Unused tax losses carried forward (base)

  Number

  3,000,000

• Probable taxable profits before the losses expire (base)

  Number

  2,000,000

  Case data: carry-forward periods set by the tax law; management assumption: forecast profits, to be supported.

• Taxable differences of the same authority and entity reversing in the relevant periods (base)

  Number

  800,000

• Forecast future taxable profit over the relevant periods (base)

  Number

  1,200,000

• Deductions from the reversal of deductible temporary differences included in the forecast (base)

  Number

  0

• Taxable profit created by tax planning opportunities (base)

  Number

  0

• Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  Number

  20 %

• Deferred tax asset recognised before reassessment

  Number

  500,000

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 12 §24IAS 12 §27IAS 12 §27AIAS 12 §28IAS 12 §29IAS 12 §29AIAS 12 §30

• Points examined

  ChecklistRequired

  • Asset recognised to the extent that taxable profit is probable
  • Sources relating to the same taxation authority and the same taxable entity
  • Taxable reversals in the period of reversal of the deductible difference or in the carry-back or carry-forward periods
  • Future profit assessed excluding deductions from the reversal of deductible differences
  • Legal restriction on set-off by type of income: assessment only with differences of the same type
  • Recovery of assets above their carrying amount used only on sufficient evidence
  • Planning opportunity: action creating or increasing taxable profit, not a mere reversal of deductible differences

IAS 12 §34IAS 12 §35IAS 12 §36

• Points examined

  ChecklistRequired

  • Asset on losses and credits carried forward to the extent that future profit will allow their use
  • Recent losses: asset limited to sufficient taxable differences or other convincing evidence
  • Taxable differences producing taxable amounts before the losses or credits expire

IAS 12IAS 12 §56

• Points examined

  ChecklistRequired

  • Unrecognised assets reassessed: recognised if they have become recoverable
  • Carrying amount reviewed and reduced if taxable profit is no longer probable
  • Reduction reversed when taxable profit becomes probable again

IAS 12 §24IAS 12 §28IAS 12 §29IAS 12 §34IAS 12 §36IAS 12 §53IAS 12 §56

• Probable taxable amounts available for losses, after the reversal deductions are absorbed (reversals + future profit − reversal deductions + planning)

  Calculation

  2,000,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; − Deductions from the reversal of deductible temporary differences included in the forecast (base) ; Taxable profit created by tax planning opportunities (base)

  Teaching presentation assumption: the sources in paras. 28 and 29 are added on a base level; a negative result is brought back to zero. Forecasts are management assumptions of the case.

• Tax losses usable before expiry (base)

  Calculation

  2,000,000

  Unused tax losses carried forward (base) ; Probable taxable profits before the losses expire (base)

• Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning)

  Calculation

  2,000,000

  Taxable differences of the same authority and entity reversing in the relevant periods (base) ; Forecast future taxable profit over the relevant periods (base) ; Taxable profit created by tax planning opportunities (base)

• Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

  Calculation

  400,000

  Probable taxable amounts excluding reversal deductions (reversals + future profit before those deductions + planning) ; Rate expected on reversal, enacted or substantively enacted at the reporting date (%)

  IFRS rule: deductible differences are compared with future taxable profit that excludes the tax deductions resulting from their own reversal (para. 29(a)); the tax is therefore computed on the probable taxable amounts before those deductions. Usable losses (dedicated calculation) enter the gross asset, never the sources.

• Deferred tax asset recognisable at the reporting date

  CalculationRequired

  400,000

  Gross deferred tax asset: deductible differences (“Temporary differences schedule”) and losses usable before expiry × rate ; Tax on the probable taxable amounts excluding reversal deductions (× expected rate)

• Reduction of the deferred tax asset

  Calculation

  100,000

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Increase in the asset (new recognition or reversal of a reduction)

  Calculation

  0

  Deferred tax asset recognised before reassessment ; − Deferred tax asset recognisable at the reporting date

• Reduction of the deferred tax asset

  Entry

  Account	Debit	Credit
  Deferred tax expense	100,000
  Deferred tax asset		100,000

  Teaching assumption: asset arising from items recognised in profit or loss; an asset relating to an item outside profit or loss follows that item (“Deferred tax measurement and allocation”).

• Recognition or reversal of the deferred tax asset

  Entry

  Debit Deferred tax asset ← Increase in the asset (new recognition or reversal of a reduction) ; Credit Deferred tax income ← Increase in the asset (new recognition or reversal of a reduction)

IAS 12 §24IAS 12 §29IAS 12 §29AIAS 12 §30IAS 12 §34IAS 12 §35IAS 12IAS 12 §56

• Conclusion on recoverability

  JudgmentRequired

  Asset partly recognised (limited to probable sources)

  Asset recognised in full / Asset partly recognised (limited to probable sources) / No asset recognised (taxable profit not probable)

  Professional judgement, always reasoned: probability of taxable profit, convincing evidence when there are recent losses (para. 35); this model sets no probability threshold.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  REVERSALS_AND_SIGNED_CONTRACT_ONLY_CONVINCING_EVIDENCE

• Tax planning opportunities

  JudgmentRequired

  No opportunity identified

  Opportunity retained (realistic action creating taxable profit) / Rejected: mere reversal of existing deductible differences / No opportunity identified

  Professional judgement: realism of the action and period in which it creates profit; an action that merely reverses deductible differences creates no taxable profit, so it is not an opportunity within para. 30.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

  NO_TAX_PLANNING_OPPORTUNITY_IDENTIFIED

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 12 §81IAS 12

• Information prepared

  ChecklistRequired

  • Deductible differences, unused losses and credits with no asset recognised (amount)
  • Asset recognised by type of difference and of losses or credits
  • Asset depending on future profits or entity with a recent loss: amount and nature of the evidence

• Draft note: evidence supporting the asset recognised

  TextRequired

  UNRECOGNISED_LOSSES_AND_EVIDENCE_SUPPORTING_DTA

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The conclusion on recoverability is documentedPass
• The review of planning opportunities is documentedPass
• The recognisable asset is computedPass
• The draft note is writtenPass
• The reduction entry balancesPass
• The increase entry balancesNot evaluated

Assets

-100,000

Liabilities

0

Profit or loss

-100,000

OCI

0

Equity

-100,000