FRS 102 ― specific deferred tax issues

Produced by Tolley in association with Steve Collings

Corporation Tax

Guidance

Voluntary revaluations of property, plant and equipment

Under FRS 102, s 17 gains and losses on the revaluation of property, plant and equipment are recognised in the statement of other comprehensive income, which is outside of the income statement, via a revaluation reserve which sits in the equity section of the balance sheet. These are revaluations of tangible assets which are held for use in the production or supply of goods or services or for administrative purposes (eg the head office of the company). When the revaluation model is applied, the alternative accounting rules in the Companies Act 2006 are applied.

Deferred tax must be recognised assuming a sale of the property at the reporting date, using the tax rates and allowances that apply to the sale of the asset.

The initial deferred tax asset or liability and any change in the balance in subsequent accounting periods is recognised in ‘other comprehensive income’ to match the valuation adjustment giving rise to it.

See Example 1.

Measurement of investment property after initial recognition

FRS 102, s 16, requires

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FRS 102 ― specific deferred tax issues

FRS 102 ― specific deferred tax issues

Voluntary revaluations of property, plant and equipment