Deferred Tax Service
As Management Consultants we assist our clients with :
Design of tools to compute deferred taxes and monitor tax efficiently
Computation of deferred tax, effective tax rate, and monitoring tax structuring efficiency
Review of deferred tax computation and disclosures in line with IFRS
Tax Planning supported with deferred tax usage.
We also train finance and tax management staff on the practical application of the deferred tax on the accounts they are preparing and also on provisions they have to make.
The following pitfalls may be noted in computing deferred taxes
Calculating a deferred tax balance – the basics
Allocating the deferred tax charge or credit
Disclosures & Presentation
The manner of recovery and the blended rate
When there are business combinations and consolidated accounts
Recognition of deferred tax assets
Deferred Tax is taxation due to “timing differences” . Deferred tax is simply recording a tax that would ordinarily be due today but because of tax rules, the incidence of payment is at a future date. We recognize the tax effect of the transaction either as an assets or a liability.
Deferred Tax arose because of a principle in Accounting which is called “Match Concept”. The concept require that we recognize income and expense when they are incured and not when cash is paid or received for such transaction. Therefore if a transaction effect leading to a tax expenses, it should recognized as a further deduction to profits and recognized as a deferred tax liability and vice versa
We therefore recognize tax expense as soon as they occur in accordance with accrual basis and not when actual payment is made for such taxes
It is provision that ensures that total tax expense is matched with income for a given period.
Companies may hold that the useful life of a Laptop is 5years and therefore apply a depreciation rate of 20% on a straight line basis. However, the Capital Allowance the Tax Authorities may give for such Assets may be 50% for first years and 25% yearly. The tax man will allow the company to claim more allowances today more than the company would have claimed to stick to its flat rate of 20%. In other to match the fact that the company may pay more in taxes in the future, it will provide for deferred tax liability to position it for being able to settle when the tax incidence falls due
Deferred Tax Liability is the amount of tax payable in the future by the company, while deferred tax assets are claims or assets that the company can make use to reduce taxable income because the company has overpaid taxes in the past. It records it as an Assets in its Balance Sheet
Chartered Accountants in Nigeria have the responsibility to prepare financial statements that recognize deferred tax, disclose and also present same in line with standards
We look forward to your reaching us for assisting with Recognition, Disclosure & Presentation in your financial Statement. Write: firstname.lastname@example.org or 08023200801