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On 1 November 20X3. the company had granted ten mil lion share options worth $40 million subject to a two
year vesting period. Local tax law allows a tax deducti on at the exercise date of the intrinsic value of the
options. The intrinsic value of the ten million share options at 31 October 20X4 was $16 million and at 31
October 20X5 was $46 million. The increase in the share price in the year to 31 October 20X5 could not be
foreseen at 31 October 20X4. The options were exercised at 31 October 20X5. The directors are unsure how
to account for deferred taxation on this transacti on for the years ended 31 October 20X4 and 31 October
20X5.
Accounting for Defered tax?
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