The following Corporation Tax guidance note Produced by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:
The fundamental principle when transitioning from FRS 105 to FRS 102 is that any changes in accounting policy must be applied retrospectively.
There are, however, transitional rules to make the process more efficient, where some adjustments will not be required.
Transitional adjustments can affect taxable profits and consequently the corporation tax computation in the year in which FRS 102 is adopted (and subsequently). This is covered in detail in the Transitional issues affecting the corporation tax computation and return guidance note.
FRS 105 does not permit the booking of deferred tax. On transition to FRS 102, deferred tax assets and liabilities will need to be booked in accordance with the principles in FRS 102, s 29.
An entity is not required to restate business combinations that occurred prior to the start of the comparative year. However, if it chooses to restate, the entity must do so in respect of all subsequent business combinations under FRS 102 from the earliest one it chooses to restate.
FRS 105 does not permit the recognition of intangible assets acquired in a business combination. It is unlikely that the company will have sufficient information to calculate the fair value of these intangible assets acquired in previous business combinations and therefore the transitional simplification will be used.
The company must recognise deferred tax for any fair value adjustments made to the acquired entities assets and liabilities which still remain at the transition date.
Normally, this deferred tax would affect the amount of goodwill recognised (see the FRS 102 ― specific deferred tax issues guidance note), but because of the restriction on changing the carrying value of goodwill (see above), the corresponding entry will be to retained earnings.
Business combinations undertaken in the comparative year will need to be restated for any differences between FRS 105 and FRS 102, such as the recognition of additional intangible assets (see the FRS 102 ― specific deferred tax issues guidance note).
Deferred tax must be
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