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Deferred tax under FRS102

Does deferred tax under FRS102 reduce distributable reserves?

Didn't find your answer?

Client has revalued investment property of say £1m

Under FRS102 deferred tax will need to be provided

The revalued amount will not be distributable (as now). My question is, does the deferred tax reduce distributable reserves, or can it go against the undistributable revaluation amount (which I appreciate in future will be a P&L item as opposed to a revaluation reserve)?

Thanks

 

 

Replies (9)

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By johngroganjga
13th Apr 2017 12:41

It does not reduce distributable reserves any more than the unrealised gross surplus on which it arises increases them.

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Replying to johngroganjga:
By Ruddles
13th Apr 2017 13:14

But the unrealised surplus does not increase distributable reserves. I think it is a valid question, the answer to which should be somewhere, but where I'm not sure at the moment.

EDIT - didn't take me long to find the answer, which is that the deferred tax reduces the unrealised profit.

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Replying to Ruddles:
By johngroganjga
13th Apr 2017 12:55

I and the OP are already well aware that the gross revaluation surplus does not increase distributable reserves. That was the basis of his question and my response.

Beyond that I am not sure what your point is.

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Replying to johngroganjga:
By Ruddles
13th Apr 2017 12:57

My point is that while it is probably perfectly clear in your own mind, your wording is ambiguous.

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Replying to Ruddles:
By johngroganjga
13th Apr 2017 13:49

Sorry if you found it that way but having reread my first response ad nauseam I cannot see what is ambiguous about it.

Admittedly it presupposes that the person reading it knows that the extent to which a gross unrealised surplus is distributable is Nil. It was addressed to the OP who had said in terms that he believed that that was the case, and so did not need enlightening on that point.

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Replying to johngroganjga:
By Ruddles
13th Apr 2017 14:05

johngroganjga wrote:
having reread my first response ad nauseam I cannot see what is ambiguous about it.

I wouldn't expect you to. I'm quite happy to confess that I'm guilty of posting comments which, while perfectly clear in my own mind, are ambiguous to other readers.
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By mely
13th Apr 2017 13:39

Hello. Investment property fair value gains and losses together with deferred tax consequences are reported through P&L. The net gain (revaluation surplus less deferred tax) would not be distributable. Most accounts I see are keeping the net surplus in a separate account within equity, rather than contained within retained earnings.

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By alltaxedout
13th Apr 2017 14:38

Many thanks guys

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By pdorrington
30th Oct 2017 20:30

So just to add clarity to this post, deferred tax adjustments on investment property gains would be deducted against the FV reserve as non-distributable ?

For example :

DR Deferred tax P&L £5,000
CR Deferred tax B/S £5,000

DR FV reserves £5,000
CR P&L reserves £5,000

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