ACCA SBR · Guided practice (Show me how)
Chapter 20: Deferred tax (IAS 12)
Deferred tax: revaluation, accelerated allowances and share options
Example 3 - Revaluations. Clarke bought a property for $500,000 on 1 January 2015. On 31 December 2015 the property had a carrying value of $480,000 and was revalued to $800,000. The tax written down value at 31 December 2015 was $420,000 and the tax rate is 20%. No deferred tax had been recognised on the property before 2015.
Example 1 - Accelerated capital allowances. Osborne buys an asset for $150,000 at the start of the financial year. The asset has an estimated life of 6 years and an estimated residual value of $30,000. Capital allowances are available at a rate of 25% reducing balance and the tax rate is 20%. Figures are rounded to the nearest $ each year.
Example 2 - Share based payments. Brown has granted 1,000 equity settled share based payments to each of its 100 employees. The vesting period is four years and no employees are expected to leave over this period. The fair value of the option at the grant date was $2 and its intrinsic value at the end of the first year was $1.60. The tax rate is 20%; a tax deduction is given only when the options are exercised.
Clarke: deferred tax on a revaluation
Calculate Clarke's revaluation gain, the temporary difference and deferred tax liability at 31 December 2015, and the deferred tax charged to other comprehensive income and to profit or loss for the year ended 31 December 2015.
Osborne: accelerated capital allowances
Calculate Osborne's tax base at the end of year 2, the deferred tax liability at the end of year 3 and the deferred tax charged to profit or loss in year 3.
Brown: share-based payment
Calculate the deferred tax balance in Brown's statement of financial position at the end of the first year in relation to the share-based payment scheme.
Opening this exercise…