Tax calculation and disclosure examples

This item includes two worked examples of income tax disclosures prepared in accordance with NZ IAS 12. The spreadsheets used for these examples include a summary of the movements in the tax accounts, the tax-related journal entries, the current tax calculation, the deferred tax calculation, and a summary of the tax and accounting fixed asset registers.

Example 1 – Tax calculations TMCL 2021

This example is based on a profitable operating company with revalued assets. It shows the calculation of deferred tax on revaluation gains and the accounting treatment of tax loss transfers. The example does not include any adjustments in the deferred tax calculation in relation buildings, as the remaining useful life for buildings exceeds 67 years.

Example 2 – Tax calculations TMIL 2021

This example is based on a company with an investment property, derivatives and tax losses. In this example, the presumption of recovery by sale for the investment property has not been rebutted. As a result, deferred tax on this asset is calculated based on the tax consequences of sale. In addition, as the entity does not satisfy the probable test, it is unable to recognise a deferred tax asset in relation to some of its tax losses. The example also shows the tax treatment of hedge accounting for derivatives.

The tax note included in the spreadsheet is based on the disclosures required for entities reporting under Tier 1. Disclosure of the balance of imputation credits is not required under Tier 2 (Reduced Disclosure Regime).

For further information about deferred tax and tax loss transfers, please refer to the following items on our website:

• Deferred tax calculation guidelines
• Accounting for tax loss transfers

Disclaimer:
This document is intended only as a general guide, and should not be used or relied upon as a substitute for specific professional advice. No liability is accepted for loss or damage incurred by persons who rely on this document.

Page last updated: 9 February 2021