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

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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)

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should be recorded 68,000

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I hope this will help you..

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..