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Hey, I don’t understand the deferred tax implications for unremitted earnings.
Can you help me out?Thanks!
Hi,
Essentially unremitted earnings will be taxed when they get remitted in the future as dividends. There is therefore a future tax consequence as tax will be payable on the dividend received. We should therefore recognise a deferred tax liability now to reflect this future tax payment.
It’s a load of nonsense really as the earnings may never be remitted as dividends and therefore no tax will ever be paid but IAS 12 ignores that.
Hope that helps.
Thanks
We recognise the DTL in the current year since the unremitted earnings and therefore the tax on it relates to current year….Am i right?
No – it’s because it may be remitted in the future. Only relevant for dividends from associates.
Yeah, but why recognise the DTL in the current year?
what i assume – Accounting profit shows the share of profit from associate (Unremitted)
But tax is only charged in the future ie when the earnings are remitted in the form of dividends
That is why we recognise a DTL in the current year?
wanted to know whether i understood it rightKindly tell.Thanks
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