Review the deferred tax proof

Modified on Mon, 10 Nov at 4:43 PM

Overview

The deferred tax proof report helps users understand movements in deferred tax assets and liabilities. This article explains how to access the report, interpret its views, and make adjustments for disclosures and classifications.

Accessing the deferred tax proof

From an entity's tax year summary, in the navigation bar select Reports > Deferred Tax Proof.

The deferred tax proof displays the carrying amount and tax bases of trial balance accounts. Toggle between the default standard view and the advanced view by selecting Advanced in the top right corner.

In the Advanced view, the Deferred tax prior period version drop-down menu allows users to select another version of any return to compare with the current version.

Where the deferred tax numbers come from

The figures in the report are populated from workpapers that create a temporary difference. These include:

Temporary difference or tax base workpapers
Capex registers
Losses
Supplementary dividends

When a temporary difference workpaper is added to a trial balance account, it will populate the deferred tax proof. The account is assigned a deferred tax type. To change the type, from the Deferred Tax Proof screen, select the Settings cog of the line item, then select from the list.

To edit the standard list of deferred tax types, select Edit Type.

Select New Type to add the name of a new deferred tax type. Select the Settings cog next to the line item to edit or delete.

Add a prior period account balance

The Prior Period tab is used to track movements in the deferred tax position between prior period accounts and tax return. Differences between the Prior Period Accounts column and Prior Period Return column will create a prior period adjustment in the Tax Account Movements tab. By default, Prior Period Accounts will be based on the prior period tax return position, but this can be edited to reflect the accounts position and create the prior period adjustment.

From the Deferred Tax Proof screen, select the Prior Period tab.
Select Edit.
Enter the account balance(s).
Select Done.

The Recognition tab

The Recognition tab is used to de-recognise all or specific deferred tax items:

If an item has never been recognised, update it as unrecognised in all columns.
If an item is newly unrecognised in the current year, adjust it only in the Current Period section. This automatically creates an adjustment journal on the Movement tab.
Similarly, if an item is now recognised but was previously unrecognised, adjust it only in the Prior Period columns.

If the deferred tax items change, any recognition settings should be reviewed and updated as needed. These do not automatically update when the deferred tax balance changes. To derecognise deferred tax:

From the Deferred Tax Proof screen, select the Recognition tab.
Select Edit.
Enter the amount(s) into the Unrecognised column(s).
Select Done.

Reclassification

The Classification tab allows the reclassification of deferred tax. It can be used to get the deferred tax notes more accurate as any changes made will flow to the Tax Notes.

Reclassify the deferred tax asset and liability

From the Deferred Tax Proof screen, select the Classification tab.
Select the Settings cog next to the line item, then select either Net deferred tax asset or Net deferred tax liability.

Reclassify current and non-current deferred tax

From the Deferred Tax Proof screen, select the Classification tab.
Select Edit.
Enter the amount(s) into the Non-Current column(s).
Select Done.

Reclassify deferred tax movement from profit or loss

Reclassifying deferred tax items should be used for items that have not moved through profit or loss, for example movements through equity. You can reclassify deferred tax movement from profit or loss to:

Other comprehensive income
Reclassified from equity to profit or loss
Directly to equity
Acquisitions or disposals

From the Deferred Tax Proof screen, select Note Disclosures
Select Edit.
Enter the account balances.
Select Done.

Troubleshooting

Deferred tax proof is not displaying

The deferred tax proof is on by default, so if the deferred tax proof does not display any numbers it has been turned off. To reenable:

From the entity’s tax year summary, in the navigation bar select the three ellipses > Settings.
Under Provision Settings > Accounting for deferred tax select Yes.

Add a temporary difference workpaper

Understanding the current tax proof

Set up tax account movements

Tax notes for financial reporting