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Deffered tax on share based payment

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Deffered tax on share based payment

  • This topic has 4 replies, 2 voices, and was last updated 13 years ago by madiha1.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • May 29, 2012 at 5:12 pm #52953
    madiha1
    Member
    • Topics: 5
    • Replies: 2
    • ☆

    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!

    May 30, 2012 at 9:04 am #98604
    cuteleo110
    Participant
    • Topics: 7
    • Replies: 385
    • ☆☆☆

    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..

    May 30, 2012 at 9:31 am #98605
    madiha1
    Member
    • Topics: 5
    • Replies: 2
    • ☆

    thanx !! it did help me..
    i still didnt get the logic behind taking the carrying value zero ?

    May 31, 2012 at 5:45 am #98606
    cuteleo110
    Participant
    • Topics: 7
    • Replies: 385
    • ☆☆☆

    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..

    May 31, 2012 at 12:43 pm #98607
    madiha1
    Member
    • Topics: 5
    • Replies: 2
    • ☆

    😀 thank yew !!
    Good luck to u too.

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