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Thread: Deferred Tax

  1. #1
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    Question Deferred Tax

    Hi all.

    I've noted that a lot of owner-managed close corporations or private companies that are not audited/reviewed, disregards the disclosure of deferred tax in its AFS.

    I have a new client that has not accounted for deferred tax in its prior AFS', however there is deferred tax (on accruals & ppe) for the year in which I am to compile the AFS.
    (DT appears on the temporary difference between SBC wear and tear allowance and company's depreciation useful life).

    I am aware that the nondisclosure does not affect any tax compliance or the decision-making of the users (members/owners/banks).
    But I am rather concerned that no deferred tax was considered at all.

    Question:
    Is it mandatory to disclose deferred tax on items in the AFS of a small IFRS for SME entity?
    I know that according to IFRS for SME and IFRS itself it is a note that is to be disclosed.
    But at the same time, does one consider if the note is material enough to disclose?
    And if so, is the materiality of this note driven by the amount or the nature?
    Amount (its effect on the health of balance sheet) ; nature (compliance with IFRS/IFRS SME)

    Does anybody else ever disclose deferred tax in their small close corporation or private company clients' AFS or is this note negligible?

    Thanks.

  2. #2
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    If it is an SBC, and you arrive at a value, how sure are you that it will come to pass? I ask this because it is often difficult to determine the tax on the temporary differences because of the exempt profit and then what amounts to a sliding scale. I guess you should then say why you are disregarding it.

    Other than that, there is not really a reason for it to be disregarded. Even if it was disregarded in previous years, just show it as applicable to prior years in the analysis, much like you would if it was an income tax charge related to prior years. That's what I do anyway.

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