FRS 102 ― tax reconciliation disclosures

By Tolley in association with Malcolm Greenbaum
Corporation_tax_img

The following Corporation Tax guidance note by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:

  • FRS 102 ― tax reconciliation disclosures
  • Introduction
  • Examples of reconciling items

Introduction

FRS 102  requires a note to the financial statements that reconcile:

  • the total tax expense (income) included in profit or loss
  • the profit or loss on ordinary activities before tax multiplied by the ‘applicable tax rate’

FRS 102, s 29.27(b)

This allows users to understand the reasons why the actual tax expense is not equal to the profit before tax figure multiplied by the corporation tax rate in force at the reporting date.

‘Applicable tax rate’ is not defined by FRS 102. The same phrase is, however, used in International Financial Reporting Standard IAS 12:

Income Taxes: an entity uses an applicable tax rate that provides the most meaningful information to the users of its financial statements. Often, the most meaningful rate is the domestic rate of tax in the country in which the entity is domiciled, aggregating the tax rate applied for national taxes with the rates applied for any local taxes which are computed on a substantially similar level of taxable profit (tax loss). However, for an entity operating in several jurisdictions, it may be more meaningful to aggregate separate reconciliations prepared using the domestic rate in each individual jurisdiction. The following example illustrates how the selection of the applicable tax rate affects the presentation of the numerical reconciliation.”

So there would seem to be a choice of using the domestic (ie UK) rate of tax or an average rate

More on Disclosure of tax in company accounts: