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IFRS 16 transition adjustment

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I need to recognize deferred tax on a IFRS 16 transition adjustment.

In equity is booked a credit of 200K. This is amortised with 20K.

In my tax return a schedule called change in Basis IFRS 16 is updated. One entry is called deferral amount cf -102 K.

Is it correctly understood that deferred tax related to a transition adjustment is the carrying value - the tax basis?

Not sure why a tax basis could be different from carrying value for a transition adjustment?

 

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By paul.benny
05th Feb 2021 07:47

From your other posts on the subject, it sounds like you're completing a tax pack for your corporate team.

Remember, deferred tax is balance sheet driven and is the calculated on the difference between values of assets and liabilities for tax purposes and values for accounting purposes. The difference between opening and closing deferred tax gives you the P&L DT amount.

The equity side of the transitional adjustment for IFRS16 does not of itself give rise to deferred tax.

I think you need to ask your corporate team what they intend you to show here.

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By johnt27
05th Feb 2021 09:44

Totally agree. It also sounds like the tax pack being done is for the USA, where the tax rules are completely different to the UK.

On adoption of IFRS 16 for UK companies there is no deferred tax impact as the depreciation and interest are stripped out of the tax comp and replaced with the lease payments, putting the UK co back in the position it was prior to implementing IFRS 16.

I don't know the rules in the US for IFRS 16, but typically depreciation on PPE is allowable for state and federal taxes, albeit with local state to state variability. If it were the same for deprecation on RoU assets then you do need to consider deferred tax.

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