deffered tax is the diffrnce btween carrying value n tax base..in share based payment carrying value is taken as zero.why zero?? can u please explain me the treatment of deffrd tax on share based payment!
Ask the Tutor ACCA SBR
Deffered tax on share based payment
Normally deferred tax is arise.
Carrying Amount is normally ZERO..
Tax Base will be intrinsic value at the end of year.
e.g:
Grand date FV of options 450,000.
Service Condition 3 years ( vesting period) 3 years
tax rate 40%
Intrinsic Value 1st year end 390,000
intrinsic value 2nd year 540,000
Required: What expense will be recognized each year according to IFRS 2 and make adjustment for deferred tax for 1st and 2nd year..
Year 1 Share Based Payment Expense (450,000/3) 150,000
Carrying Value is ZERO.. 0
Tax Base (390,000* 1/3) 130,000
Taxable Difference 130,000
entry:
Deferred Asset (130000*40%) 52,000
P&L 52,000
Year 2: Expense 150,000.
Share Based Payment Carrying Amount 0
Tax Base (540,000* 2/3) 360,000
Temporary Difference 360,000
Def: Tax asset is 360000*40% = 144,000.
now cumulative expense recorded (150+150) 300,000
tax base is exceeding by (360,000 (tax base) - 300,000 (charged to P&L) ) 60000^
^ when tax base is exceeding from expense recorded, then excess will be charged to equity with tax rate..
Deferred tax asset 2nd year 144,000
Deferred tax asset 1st year (52,000) recorded
Should be recorded with 92,000
Deferred Tax asset 92,000
P&L ( balancing) 68,000
D.T ( equity 60000*40%) 24,000
OR
P&L should be recorded (300,000*40%) 120,000
Recorded last year (52,000)
should be recorded 68,000
I hope this will help you..
Carrying Amount is normally ZERO..
Tax Base will be intrinsic value at the end of year.
e.g:
Grand date FV of options 450,000.
Service Condition 3 years ( vesting period) 3 years
tax rate 40%
Intrinsic Value 1st year end 390,000
intrinsic value 2nd year 540,000
Required: What expense will be recognized each year according to IFRS 2 and make adjustment for deferred tax for 1st and 2nd year..
Year 1 Share Based Payment Expense (450,000/3) 150,000
Carrying Value is ZERO.. 0
Tax Base (390,000* 1/3) 130,000
Taxable Difference 130,000
entry:
Deferred Asset (130000*40%) 52,000
P&L 52,000
Year 2: Expense 150,000.
Share Based Payment Carrying Amount 0
Tax Base (540,000* 2/3) 360,000
Temporary Difference 360,000
Def: Tax asset is 360000*40% = 144,000.
now cumulative expense recorded (150+150) 300,000
tax base is exceeding by (360,000 (tax base) - 300,000 (charged to P&L) ) 60000^
^ when tax base is exceeding from expense recorded, then excess will be charged to equity with tax rate..
Deferred tax asset 2nd year 144,000
Deferred tax asset 1st year (52,000) recorded
Should be recorded with 92,000
Deferred Tax asset 92,000
P&L ( balancing) 68,000
D.T ( equity 60000*40%) 24,000
OR
P&L should be recorded (300,000*40%) 120,000
Recorded last year (52,000)
should be recorded 68,000
I hope this will help you..
thanx !! it did help me..
i still didnt get the logic behind taking the carrying value zero ?
i still didnt get the logic behind taking the carrying value zero ?
Madiha I tried to know the reason and logic.. but i found standard is also silent on this matter.. so do not mess with this just clear your mind.. after exam we will both try to find out logic..
Standards quote same lines.. so focus on your paper and just remember what its treatment is :)
Good Luck..
Standards quote same lines.. so focus on your paper and just remember what its treatment is :)
Good Luck..
:D thank yew !!
Good luck to u too.
Good luck to u too.
Sign into reply to this topic.