Deferred tax - FRS 19
FRS 19, Deferred Tax (In force for accounting periods ending after 22 January 2002)
This Standard continues the process of aligning UK financial reporting with international accounting standards. There are two fundamental changes to existing practice:
- full provision is required for most timing differences. Previously, under SSAP 15, a company was required to provide only for timing differences that were expected to reverse (or crystallise)
- it is permitted (but not a requirement) for companies to account for the discounted net present value of deferred tax assets and liabilities. Accounting for deferred tax does not change the amount of tax that is paid, of course, but applying FRS 19 will in general increase a company's reported liabilities.
In summary, FRS 19 requires that:
- deferred tax is provided on timing differences relating to:
- accelerated capital allowances and depreciation
- accruals for and payments of pension and other post retirement benefits
- the elimination of unrealised intra group profits
- unrelieved tax losses
- "fair value revaluations" that are taken annually to the profit and loss account
- other short-term timing differences
- deferred tax is not provided on timing differences relating to:
- other fixed asset revaluations, where there is no intention to sell
- gains that are rolled over
- unremitted overseas earnings, where there is no intention to remit.
The standard also includes further, detailed measurement and disclosure rules.
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