Deferred tax and Corporation Tax
Theory:
- deferred tax asset is recognised whenever it is porbable that it will be recovered in the future
- deferred tax asset should not be recognised when it is not probable that in the future at least some of the negative temporary differences may be realised
Examples of errors
- Overprudency (e.g. 100% of the asset unrecognised)
- or conversely - despite major uncertainties as to realization of negative temporary differences, no derecognition of part of deferred tax assets is done
- indicators of material uncertainty include e.g. losses generated in the recent years or anticipated losses in the future
