What accounting data will be needed when filling out line 1420
Enterprises, when preparing financial statements, have the legal right to reflect the balanced (i.e., rolled up) amount of deferred assets/liabilities in their balance sheet. In any case, the value of deferred tax liabilities is entered in the line, which is relevant as of the reporting date, as of December 31, the previous and previous periods. To enter information in line 1420 you will need to look at:
- credit balance on account 77,
- debit balance for account 09.
So, depending on which method of reflecting the amount of deferred liabilities the organization’s management chooses, additional actions may be required. A couple of points to consider:
- In any case, the indicators on line 1420 are transferred from the balance sheet for the previous year to December 31 – the previous and previous periods.
- If in the balance sheet for the reporting year, the indicators as of December 31, 2019, and the previous periods preceding the previous one, the amounts of deferred assets/liabilities were indicated in expanded form, and the enterprise customarily reflects the amounts of deferred tax assets/liabilities as of the reporting date in a collapsed form, the indicators as of December 31. - those periods will have to be recalculated before reflecting them in the balance sheet for the reporting period - this will ensure the comparability of the reporting data. The same applies to the reverse situation, when the information was reflected in a collapsed manner, but in the reporting period it was decided to indicate the indicators in an expanded manner.
- It is necessary to compare the balance on account 09 with the balance on account 77 - depending on which value is greater, the indicator on line 1420 can be calculated differently (formulas will be given below in the article).
Deferred tax accounting principles
As part of the implementation of the plans of the Ministry of Finance of Russia to develop accounting and reporting based on International Financial Reporting Standards, the Central Bank of the Russian Federation approved Regulations dated December 25, 2013 N 409-P “On the accounting procedure for deferred tax liabilities and deferred tax assets.” The first accounting entries to reflect calculated deferred taxes in accordance with the requirements of the position in the balance sheets of credit institutions must be made for the first quarter of 2014 no later than May 15, 2014. The norms of Regulation N 409-P are based on the provisions of IFRS, in particular IAS 12 “Income Taxes”, and the IFRS Explanations adopted by the IFRS Foundation and approved by Decree of the Government of the Russian Federation dated 02.25.11 N 107. The procedure for calculating deferred tax liabilities and deferred tax assets, laid down in Regulation N 409-P, is based on the balance sheet method, i.e. by comparing the book value of assets and liabilities with their corresponding tax base.
In accordance with clause 1.3 of Regulation N 409-P, temporary differences are defined as the differences between the balances on the bank’s active and passive balance sheet accounts, with the exception of capital accounts, and their tax base, determined in accordance with the legislation of the Russian Federation on taxes and fees and accounting policies bank for tax purposes.
Temporary differences are divided into:
taxable temporary differences - temporary differences leading to the formation of deferred income tax, which in future reporting periods should increase the amount of income tax payable to the budget;
deductible temporary differences are temporary differences leading to the formation of deferred income tax, which in future reporting periods should reduce the amount of income tax payable to the budget.
Temporary differences are calculated until the balances on active (passive) balance sheet accounts are completely written off, as well as until the results of operations or events, including those reflected in previous reporting periods, in the bank’s accounting cease to influence the increase (decrease) of taxable profit.
In accordance with the requirements of Regulation N 409-P, amounts that could affect an increase or decrease in the amount of income tax payable to the budget system of the Russian Federation in future reporting periods are subject to reflection in accounting: deferred tax liabilities and deferred tax assets (deferred taxes).
Deferred tax liability is the amount of income tax payable to the budget in future reporting periods in relation to taxable temporary differences.
Deferred tax asset is the amount of income tax that is subject to reimbursement in future reporting periods in respect of deductible temporary differences and loss carryforwards that were not used to reduce income taxes.
In accordance with paragraph 4.1 of Regulations N 409-P, the reporting period for the purpose of determining and reflecting deferred taxes is the first quarter, half a year, nine months and a year.
Deferred tax liabilities and deferred tax assets determined at the end of the first quarter, half a year and nine months are reflected in the bank’s accounting records no later than 45 calendar days from the end of the corresponding reporting period.
Deferred tax liabilities and deferred tax assets determined at the end of the calendar year are reflected in the bank’s accounting records during the period when events are reflected in the accounting records after the reporting date, i.e. in the period before the date of preparation of the credit institution’s annual accounting (financial) statements.
Initially, deferred tax liabilities and deferred tax assets are determined at the end of the first quarter of 2014 and are reflected in the accounting records of the credit institution no later than May 15, 2014.
According to the draft letter posted on the official website of the Central Bank of the Russian Federation, credit institutions have the right to create an additional statement of calculation of deferred tax liabilities and deferred tax assets as of January 1, 2014, i.e. for 2013. In this case, the amounts of deferred tax liabilities and deferred tax assets as of 04/01/14 are calculated as the difference between the total values determined at the end of the first quarter of 2014 and at the end of 2013.
Otherwise, the amounts of deferred tax liabilities and deferred tax assets for the first quarter of 2014 are calculated based on the fact that as of the end of 2013 their notional value is equal to zero.
It would be more appropriate to consolidate the method of calculating deferred tax amounts chosen by the credit institution in the accounting policy for 2014.
It should also be emphasized that in accordance with clause 4.1 of Regulation N 409-P, if a credit organization has separate divisions that maintain accounting records separately from the parent organization of the bank, deferred tax liabilities and deferred tax assets are reflected only in the balance sheet of the parent organization of the bank.
However, this does not mean that the calculation of deferred taxes and the preparation of a statement of deferred tax liabilities and deferred tax assets should also be carried out only in the bank’s parent organization. Taking into account the specifics of work and document flow between the parent organization and bank branches, it is possible to organize the process with the participation of branches. Thus, if there is a wide branch network, in order to minimize possible errors, the functions of compiling a statement of transactions performed by the corresponding branch can be transferred to the branch level, with its subsequent submission for consolidation to the parent organization.
At the same time, in order to assess the effectiveness of the branch’s operation for the reporting period based on the results of reflecting deferred taxes in the balance sheet of the parent organization, it is possible to organize the transfer of financial results through paired balance sheet accounts 30305, 30306.
The calculation of deferred tax liabilities and deferred tax assets is carried out by the credit institution at the end of each reporting period on the basis of the statement of calculation of deferred tax liabilities and deferred tax assets (hereinafter referred to as the statement). The form of the statement is approved by the bank's accounting policy.
The Methodological Recommendations dated December 26, 2013 N 257-T “On the procedure for accounting for deferred tax liabilities and deferred tax assets,” approved by the Central Bank of the Russian Federation, provides the recommended form of the statement.
As already noted, the calculation of deferred taxes is based on the balance sheet method. However, not all balance sheet accounts used by a credit institution give rise to temporary differences.
Thus, accounts for accounting for cash and precious metals, accounts for accounting for funds in accounts (20202, 20203, 20208, 20209, 20210, 40501, 40502, 40503, 40601, 40602, 40603, 40701, 40702, 40703, 4 0802, 40803, 40804, 40805, 40806, 40807, 40809, 40810, 40811, 40812, 40813, 40814, 40815, 40817, 40818, 40819, 40820, 40821, 40901, 4090 2, 40903, 40905, 40906, 40907, 40908, 40909, 46902 and etc.) do not give rise to temporary differences. And in order to reduce the volume of statements and labor costs of employees, it is more expedient to consolidate their list in the accounting policy, indicating that for these balance sheet accounts there is equality in the book value of the assets and liabilities reflected on them and their tax base. And in this case, in accordance with Regulation N 409-P, temporary differences do not arise and, therefore, there is no need to calculate deferred tax liabilities and deferred tax assets.
In addition, you should pay attention to expenses that do not reduce the taxable base for income tax and do not participate in taxation, such as:
- expenses not supported by primary documents;
- expenses not related to the main activities of the bank;
- expenses exceeding the norms established by the Tax Code of the Russian Federation (representation, advertising, etc.).
Due to the fact that these expenses will never be included in tax accounting as expenses that reduce the taxable base for income tax, they do not give rise to temporary differences in the light of Regulation No. 409-P.
These expenses form the so-called constant differences in PBU 18/02 “Accounting for income tax calculations” (it should be noted that this concept is absent in Regulation N 409-P).
And in order to optimize the statement, it is also more expedient to consolidate their list in the accounting policy of the credit institution, due to the fact that a decrease in the balance on the active (passive) account on which such costs are recorded, when the recognition of accounting items is ceased in future reporting periods, will not affect the decrease (increase) taxable profit.
Deferred tax liabilities are subject to reflection in the bank's accounting records when taxable temporary differences arise.
The amount of the deferred tax liability is determined as the product of taxable temporary differences by the tax rate for income tax established by the legislation of the Russian Federation on taxes and fees and in effect at the end of the corresponding reporting period.
In the event of a change in tax rates for income tax in accordance with the legislation of the Russian Federation on taxes and fees, the amount of the deferred tax liability is subject to recalculation on the date preceding the date of commencement of application of the changed tax rates, with the difference arising as a result of the recalculation being allocated to the accounts for accounting for financial results and ( or) to accounts for accounting for additional capital.
Depending on the nature of the transaction and the procedure for reflecting in accounting changes in balances on active (passive) balance sheet accounts, the deferred tax liability is taken into account in correspondence with the accounts for accounting for financial results or with the accounts for accounting for additional capital.
Example
According to the accounting policy for tax purposes, the bank creates a reserve for doubtful debts in accordance with Article 266 of the Tax Code of the Russian Federation.
Based on the results of the inventory of accounts receivable as of April 1, 2014, a reserve in the amount of RUB 800,000.00 was created for interest income on loan debt.
The statement in this case will look like this (see Table 1).
Table 1
| Balance account N | Balance at the end of the reporting period | Tax base taken into account when calculating income tax | Taxable temporary differences | Deductible temporary differences | The amount of deferred tax liabilities, changes in the value of which are taken into account in the accounting accounts | The amount of deferred tax assets for deductible temporary differences, changes in the value of which are taken into account in the accounting accounts | Amount of deferred tax assets for loss carryforwards | ||
| financial result | additional capital | financial result | additional capital | ||||||
| — (RSD) | 0,00 | 800 000,00 | 800 000,00 | 0,00 | 160 000,00 | 0,00 | 0,00 | 0,00 | |
In general, the amount of the deferred tax asset for deductible temporary differences is determined as the product of deductible temporary differences by the tax rate for income tax established by the legislation of the Russian Federation on taxes and fees and in effect at the end of the reporting period.
In the event of a change in tax rates for income tax in accordance with the legislation of the Russian Federation on taxes and fees, the amount of the deferred tax asset is subject to recalculation on the date preceding the date of application of the changed tax rates, with the difference arising as a result of the recalculation being allocated to the accounts for accounting for financial results and ( or) to accounts for accounting for additional capital.
Deferred tax assets for deductible temporary differences are subject to reflection in accounting when deductible temporary differences arise and to the extent that it is probable that the credit organization will receive taxable profit in future reporting periods. At the same time, to the extent that the credit organization is not likely to receive sufficient taxable profit, the deferred tax asset is not subject to reflection in accounting.
The amount of recognized (reflected in accounting) deferred tax asset for deductible temporary differences is reviewed quarterly, as of each reporting date. If the probability of the bank obtaining sufficient taxable profit decreases, the amount of the recognized deferred tax asset for deductible temporary differences is also subject to reduction. Conversely, to the extent that it is probable that sufficient taxable profit will be available, the amount of the deferred tax asset recognized for deductible temporary differences increases.
It is more appropriate to either reflect the results of assessing the probability of the bank receiving taxable profit in future reporting periods and the amount of deferred tax assets recognized at the reporting date in the statement of calculation of deferred tax liabilities and deferred tax assets, or formalize them in the form of a separate professional judgment.
Accounting for unrecognized deferred tax assets for deductible differences is carried out by the credit institution outside the system.
Example
On the balance sheet of the credit organization there is loan debt of individuals, classified in accordance with the regulations of the Bank of Russia and the bank’s accounting policies as quality category IV. Accordingly, accrued interest on these loan agreements is subject to reflection in accounting on off-balance sheet account 91604. As of 04/01/14, the balance on off-balance sheet account 91604 is 900,000.00 rubles, as of 01/01/14 - 320,000.00 rubles.
In tax accounting, unearned interest on loans to individuals for the reporting period is subject to inclusion in non-operating income in full and is reflected in the corresponding tax accounting register.
The statement in this case will look like this (see Table 2).
table 2
| Balance account N | Balance at the end of the reporting period | Tax base taken into account when calculating income tax | Taxable temporary differences | Deductible temporary differences | The amount of deferred tax liabilities, changes in the value of which are taken into account in the accounting accounts | The amount of deferred tax assets for deductible temporary differences, changes in the value of which are taken into account in the accounting accounts | Amount of deferred tax assets for loss carryforwards | ||
| financial result | additional capital | financial result | additional capital | ||||||
| — (off-balance 91604) | 0,00 | 580 000,00 | 0,00 | 580 000,00 | 0,00 | 0,00 | 116 000,00 | ||
Let us assume that the credit institution has not identified any other positions to be reflected in the statement as of 04/01/14.
Based on the received statement data, it is necessary to assess the likelihood of obtaining sufficient taxable profit and (or) a sufficient amount of taxable temporary differences leading to taxable profit in the next reporting period to recognize a deferred tax asset.
The principles for assessing probability are developed by the credit organization independently and are subject to reflection in the internal regulatory documents of the credit organization. Of course, you can borrow them from the practice of calculating deferred taxes in IFRS.
Another option that has the right to life can be considered the procedure for calculating the probable receipt of taxable profit in future reporting periods based on the taxable profit received for the previous tax period, which is indicated in line 120 of sheet 02 of the “Tax return for corporate income tax”, divided into 4. This is a fairly rough calculation, but also less labor-intensive in terms of implementation.
For a more detailed calculation, it is necessary to analyze the financial flows, business plan and cost estimates for the upcoming reporting period, as well as the existence of sufficient taxable temporary differences. And in this case, it is no longer possible to do without the participation of financial planning and accounting departments.
The results of the assessment are subject to reflection in the professional judgment of the bank, drawn up by responsible employees and approved in accordance with internal regulatory documents.
The issue of delegation of responsibilities for assessing the likelihood of receiving taxable profit in future reporting periods by branches lies within the scope of the bank’s accounting policy.
The amount of deferred tax assets for losses carried forward, calculated at the end of the reporting period, will be different from zero only if the tax base for the bank profit tax indicated in the tax return is negative.
In this case, the credit organization reflects a deferred tax asset in its accounting accounts to the extent that there is a likelihood of receiving taxable profit in future reporting periods.
The amount of the recognized deferred tax asset for loss carryforwards is reviewed quarterly, as of each reporting date, similar to the algorithm for estimating the deferred tax asset for deductible temporary differences.
In the general case, the amount of the deferred tax asset for losses carried forward is determined as the product of losses carried forward that were not used to reduce income tax by the tax rate for income tax established by the legislation of the Russian Federation on taxes and fees and in effect at the end of the corresponding reporting period. .
Cessation of recognition of deferred tax assets in relation to losses carried forward into the future that were not used to reduce income tax in accounting occurs when they are fully used, do not comply with the conditions of recognition, as well as in connection with the expiration of the period for carrying forward such losses to future reporting periods established by law Russian Federation on taxes and fees.
Deferred tax liabilities are reflected in passive balance sheet account 61701 “Deferred tax liability”, deferred tax assets are reflected in active balance sheet accounts 61702 “Deferred tax asset for deductible temporary differences” and 61703 “Deferred tax asset for losses carried forward”. Balance accounts 61701, 61702 are paired.
Accordingly, according to clause 1.13 of Regulation N 385-P, it is allowed to have a balance on only one account from a pair and at the beginning of the operating day, operations begin with the account on which there is a balance.
The procedure for maintaining analytical accounting for accounts 61701, 61702 and 61703 is determined by the credit institution taking into account the requirements of provisions N 385-P and 409-P.
Depending on the nature of the transaction and the order of reflection in accounting (attribution to income and expenses or to the bank’s capital), these accounts correspond with the balance sheet accounts:
70615 (70715) “Reduction of income tax on deferred income tax” (P), income statement symbol 28103;
70616 (70716) “Increase in income tax on deferred income tax” (A), income statement symbol 28102
or
10610 “Reduction of additional capital by deferred income tax” (A);
10609 “Increase in additional capital on deferred income tax” (P).
Balance sheet accounts 70615 and 70616, 10609 and 10610 are also paired.
The procedure for maintaining analytical accounting for accounts 70615 and 70616, 10609 and 10610 is determined by the credit institution taking into account the requirements of provisions N 385-P and 409-P.
Based on the characteristics of balance sheet accounts intended for accounting for deferred taxes and balance sheet accounts intended for correspondence with them, several options are possible for reflecting the calculated amounts of deferred tax liabilities or deferred tax assets. The most interesting cases are when, at the reporting date, the deferred tax liability is reduced and a deferred tax asset is formed, or vice versa.
So, let’s assume that as of April 1, 2014, an accounting entry for the formation of a deferred tax liability in the amount of 1000 conventional units was reflected in the credit organization’s balance sheet:
| Debit | 70616 (A) | “Increase in income tax on deferred income tax” |
| Credit | 61701 (P) | "Deferred tax liability" |
Based on the results of the half year, i.e. as of 07/01/14, the deferred tax liability became equal to zero and a recognized deferred tax asset was formed in the amount of 400 conventional units, in this case the following reflection options are possible in the bank’s accounting:
1. Reduction of the initially accrued deferred tax liability in the amount of 1000 conventional units:
| Debit | 61701 (P) | "Deferred tax liability" |
| Credit | 70616 (A) | “Increase in income tax on deferred income tax” |
And an increase in the recognized deferred tax asset in the amount of 400 conventional units:
| Debit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
| Credit | 70615 (P) | “Reduction of income tax on deferred income tax” |
2. Reduction of previously accrued deferred tax liability in the amount of 1000 conventional units:
| Debit | 61701 (P) | "Deferred tax liability" |
| Credit | 70615 (P) | “Reduction of income tax on deferred income tax” |
Accrual of deferred tax asset in the amount of 400 conventional units:
| Debit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
| Credit | 70615 (P) | “Reduction of income tax on deferred income tax” |
Settlement of balances on paired accounts for 1000 conventional units:
| Debit | 70615 (P) | “Reduction of income tax on deferred income tax” |
| Credit | 70616 (A) | “Increase in income tax on deferred income tax” |
The chosen method of accounting for deferred taxes is fixed by the standard of the economic entity, i.e. accounting policy of the bank.
Depending on the option chosen, the accounting for deferred tax liabilities and deferred tax assets will look as follows.
The formation or increase of a deferred tax liability in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for accounting for financial results, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 70615 (P), 70616 (A) | “Reduction of income tax on deferred income tax”, “Increase in income tax on deferred income tax” |
| 70715 (P), 70716 (A) | “Reduction of income tax on deferred income tax” (DIT), “Increase in income tax on deferred income tax” (IDT) | |
| Credit | 61701 (P) | "Deferred tax liability" |
A decrease in deferred tax liability in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for accounting for financial results, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 61701 (P) | "Deferred tax liability" |
| Credit | 70615 (P), 70715 (P) | “Reduction of income tax on deferred income tax”, “Reduction of income tax on deferred income tax” (DIT) |
| 70616 (A), 70716 (A) | “Increase in income tax on deferred income tax”, “Increase in income tax on deferred income tax” (IDT) |
The formation or increase of a deferred tax liability in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for accounting for additional capital, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 10610 (A) | “Reduction of additional capital by deferred income tax” |
| 10609 (P) | “Increase in additional capital for deferred income tax” | |
| Credit | 61701 (P) | "Deferred tax liability" |
A decrease in deferred tax liability in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for additional capital, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 61701 (P) | "Deferred tax liability" |
| Credit | 10610 (A) | “Reduction of additional capital by deferred income tax” |
| 10609 (P) | “Increase in additional capital for deferred income tax” |
Upon derecognition of an asset, the change in the value of which is taken into account in the second-order accounts of the account for accounting for additional capital and is subject to transfer to the account for accounting for retained earnings, the balance in the account for accounting for additional capital is reduced by the balance or part of the balance in the account for reducing additional capital by deferred tax. profit related to the disposal asset, with the following accounting entries reflected in the bank’s balance sheet:
| Debit | 10601 (P) | “Increase in property value during revaluation” |
| Credit | 10610 (A) | “Reduction of additional capital by deferred income tax” |
The formation or increase of a deferred tax asset for deductible temporary differences, the change in the value of which is taken into account in the accounts for accounting for financial results or has or will have an impact on the increase (decrease) of taxable profit in the reporting period or future reporting periods, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
| Credit | 70615 (P), 70715 (P) | “Reduction of income tax on deferred income tax”, “Reduction of income tax on deferred income tax” (DIT) |
| 70616 (A), 70716 (A) | “Increase in income tax on deferred income tax”, “Increase in income tax on deferred income tax” (IDT) |
A decrease in the deferred tax asset for deductible temporary differences, the change in the value of which is taken into account in the accounts for accounting for financial results or has or will have an impact on the increase (decrease) of taxable profit in the reporting period or future reporting periods, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 70615 (P), 70715 (P) | “Reduction in income tax on deferred income tax”, “Reduction in income tax on deferred income tax” (DIT) |
| 70616 (A), 70716 (A) | “Increase in income tax on deferred income tax”, “Increase in income tax on deferred income tax” (IDT) | |
| Credit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
The formation or increase of a deferred tax asset for deductible temporary differences, the change in the value of which is taken into account in the accounts for accounting for additional capital, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
| Credit | 10609 (P) | “Increase in additional capital for deferred income tax” |
| 10610 (A) | “Reduction of additional capital by deferred income tax” |
A decrease in the deferred tax asset for deductible temporary differences, the change in the value of which is taken into account in the accounts for accounting for additional capital, is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 10609 (P) | “Increase in additional capital for deferred income tax” |
| 10610 (A) | “Reduction of additional capital by deferred income tax” | |
| Credit | 61702 (A) | “Deferred tax asset for deductible temporary differences” |
Upon derecognition of an asset, the change in the value of which is taken into account in the second-order accounts of the account for accounting for additional capital and is subject to transfer to the account for accounting for retained earnings, the balance in the account for accounting for additional capital is increased by the balance or part of the balance in the account for increasing additional capital for deferred tax. profit related to the disposal asset, reflecting the following accounting entries in the balance sheet:
| Debit | 10609 (P) | “Increase in additional capital for deferred income tax” |
| Credit | 10601 (P) | “Increase in property value during revaluation” |
| 10602 (P) | "Share premium" |
The formation or increase of a deferred tax asset for losses carried forward that were not used to reduce income tax is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 61703 (A) | “Deferred tax asset for carried forward losses” |
| Credit | 70615 (P), 70715 (P) | “Reduction of income tax on deferred income tax”, “Reduction of income tax on deferred income tax” (DIT) |
| 70616 (A), 70716 (A) | “Increase in income tax on deferred income tax”, “Increase in income tax on deferred income tax” (IDT) |
A decrease in the deferred tax asset for losses carried forward that were not used to reduce income tax is reflected in the bank’s balance sheet with the following accounting entries:
| Debit | 70615 (P), 70715 (P) | “Reduction of income tax on deferred income tax”, “Reduction of income tax on deferred income tax” (DIT) |
| 70616 (A), 70716 (A) | “Increase in income tax on deferred income tax”, “Increase in income tax on deferred income tax” (IDT) | |
| Credit | 61703 (A) | “Deferred tax asset for carried forward losses” |
In order to control the correctness of calculation and reflection of deferred taxes in accounting, it would not be amiss to use the formula recommended quite a long time ago by the Ministry of Finance of Russia, using the method of adjusting accounting data in order to determine the tax base for income tax:
NP = FR + (-) PR + VVR - NVR,
where NP is taxable profit; FR - financial result according to accounting data; PR - constant differences; ВВР - deductible temporary differences; TVR - taxable temporary differences.
The accuracy of the calculations made will depend on the correctness of the classification of differences and the degree of their significance.
Thus, in accordance with the requirements of Regulation N 409-P, no later than May 15, 2014, based on the results of the first quarter of 2014, a credit organization’s balance sheet may contain a maximum of three accounting entries to reflect deferred taxes (in the case of calculation relative to a conditional value equal to zero):
1) an increase in the deferred tax liability or deferred tax asset for deductible differences in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for accounting for financial results;
2) an increase in the deferred tax liability or deferred tax asset for deductible differences in relation to balances on active (passive) balance sheet accounts, changes in the value of which are taken into account in the accounts for accounting for additional capital;
3) an increase in the deferred tax asset for losses carried forward that were not used to reduce income taxes.
How to find the amount of deferred tax liabilities (general formula)
The formation of deferred tax liabilities is observed in cases where taxable temporary differences arise. This means that expenses in tax accounting are higher than in accounting. Now it becomes clear why the general formula for calculating deferred tax liabilities is as follows:
What are tax differences
In order to take into account the mentioned differences in accounting, account 77 “Deferred tax liabilities” is used. To decide how to handle this aspect of accounting, you need to understand what taxable differences are.
They can be:
- Permanent.
- Temporary.
Permanent differences will never be used to calculate income taxes, which is why they are called permanent differences. They can occur for a number of reasons:
- expenses on property received free of charge are not recognized for accounting purposes;
- a loss carried forward to future periods can no longer be taken into account due to the expiration of the period.
Temporary taxable differences can be used to calculate income taxes in the current or future periods. The temporary difference arises due to certain differences between accounting and tax accounting:
- depreciation of fixed assets in tax is greater than in accounting due to different methods of calculation;
- the company credited the proceeds from the sale of goods, but did not actually receive any cash;
- The methodology for calculating interest on loans varies in accounting.
Note from the author! Temporary differences must be positive to be reflected in deferred receivables.
Reasons for the occurrence of taxable temporary differences
When taxable temporary differences result in taxable profit (loss), this gives rise to deferred income tax, which, in turn, will increase the amount of income tax payable to the budget in the year following the reporting period or in the subsequent year. Let's look at the reasons why taxable temporary differences may arise:
- The use by an enterprise accountant of different procedures for reflecting the interest that the company pays to creditors for the use of borrowed funds for tax and accounting purposes.
- Recognition in the reporting period of income from the sale of manufactured products, goods, services and works in the form of income from ordinary activities.
- Application of various methods of calculating depreciation for calculating income tax and accounting purposes.
- Recognition of interest income of a company for accounting purposes based on the assumption of temporary certainty of facts of economic activity, and for tax purposes - on a cash basis.
- Other similar differences between accounting and tax accounting.
What is the difference between accounting and taxable profit, current and deferred tax?
In almost every country, accounting rules differ from tax accounting due to local tax laws and regulations. Sometimes these differences are truly significant, and accountants must make many adjustments to their accounting profits to arrive at a basis for calculating income taxes.
To fully understand the meaning and rules of IAS 12, you need to understand the meaning and differences between:
- accounting profit and taxable profit, and
- current income tax and deferred income tax.
What is accounting and taxable profit?
Accounting profit is the profit or loss for a period before deducting income tax expense. Note that IAS 12 defines accounting profit as before tax (rather than after tax) to comply with the definition of taxable profit.
[cm. definition in IAS 12:5]
Taxable profit/loss is the profit or loss for a period determined in accordance with the rules established by the tax authorities.
[cm. definition in IAS 12:5]
From the definitions, you can clearly see that these 2 numbers can differ significantly because accounting and tax rules are not the same. To overcome these differences, you must make the following adjustments to your accounting profit:
- Add expenses recognized but not deductible for tax purposes;
- Add income that is not recognized but must be included in profit for tax purposes;
- Subtract expenses that are not recognized but are deductible for tax purposes;
- Subtract income that is recognized but not included in profit for tax purposes.
What is current tax and deferred tax?
Current income tax ('current tax') is the amount of income tax you must pay (refund) to the tax authority, calculated in relation to taxable profit (tax loss) for the current period.
[cm. definition in IAS 12:5]
Deferred income tax is an accounting measure used to match the tax effect of transactions with their accounting impact, resulting in a less distorted financial result.
| Differences between current and deferred income taxes. | ||
| Current income tax | Deferred income tax | |
| Essence: | subject to payment to the tax authority | accounting indicator |
| Base: | taxable profit/loss | temporary differences |
| Period: | current period | future periods |
Estimating current tax liabilities (assets) is very simple. We need to take the tax rate in effect at the end of the reporting period and apply it to the taxable profit (loss).
Current income tax = Taxable profit (tax loss) * Tax rate
Current income tax expense is in most cases recognized directly in profit or loss. However, if current tax arises from a transaction or event that is not recognized in profit or loss or other comprehensive income or equity, then current income tax is recognized in the same way.
Deferred income tax is the income tax that is payable (recoverable) in future periods due to temporary differences, unused tax losses and unused tax credits.
[cm. definition of deferred tax liabilities and deferred tax assets in paragraph IAS 12:5]
Deferred tax liabilities arising from taxable temporary differences and deferred tax assets result from temporary differences, unused tax losses and unused tax benefits.
We can calculate deferred tax as temporary differences multiplied by the applicable tax rate.
Temporary difference = Carrying value - Tax value
Deferred income tax = Temporary difference * Tax rate
Before diving into the concept of temporary differences, you need to first understand the tax cost.
An example of how a deferred tax liability is created
Important! The income tax rate and distribution by shares depend on the field of activity and the region of location of the company. The example will consider randomly selected values.
Let's imagine a hypothetical company, BukhDukh LLC. An accounting employee, by decision of his superiors, calculates depreciation in accounting using the straight-line method . However, tax accounting uses a non-linear method . The company acquired a certain fixed asset, which cost the owners 320 thousand rubles . Since its cost turned out to be more than one hundred thousand rubles, the Tax Code requires the taxpayer to depreciate this fixed asset in tax accounting.
The accountant found the depreciation period for this fixed asset in the All-Russian Classifier of Fixed Assets, and it turned out that it belongs to the tenth group (for fixed assets of this depreciation group, a useful life of 361 months - 30 years at 12 months). Recall that the accountant is instructed to use the straight-line method, and therefore depreciation will be calculated as shown below:
310,000 rub. : 361 months = 858.72 rubles/month.
The economic interpretation of the obtained value is that every month 858 rubles 72 kopecks of depreciation must be written off from the cost of the new OS. The fact that this object belongs to the tenth depreciation group implies a monthly depreciation rate of 0.7%:
310,000 rub. x 0.7% = 2170 rub.
This means that depreciation deductions in the amount of 2,170 rubles .
Let us present the obtained values in tabular form for clarity:
Let's calculate the amount of the temporary taxable difference:
2170 rub. – 858.72 rub. = 1311.28 rubles.
Let's calculate what value of deferred tax liabilities will be transferred to account 77:
RUB 1,311.28 x 20% = 262.25 rubles
(20% is the tax rate for income tax, taking into account the regional and federal shares).
The accountant will make the following entry:
Dt 68.4 “Calculations for income tax” Kt 77 – 262.25 rubles.
Example of formation of line 1420 “Deferred tax liabilities”
Let's analyze the situation with filling out line 1420 of the Balance Sheet using the example of a hypothetical commercial organization Smart Finance LLC. It is known that management made a decision to reflect the amount of deferred tax assets/liabilities in expanded form. The indicators for accounts 77 and 09 in the company’s accounting are as follows:
Fragment of the Balance Sheet for 2013:
If it were decided to show deferred tax liabilities/assets on a net basis:
The solution of the problem.
- If a company chooses to report the net amount of deferred tax assets/liabilities on its balance sheet:
The balance of deferred tax assets/liabilities as of December 31, 2014 will be equal to:
66 tr. – 396 tr. = -330 tr.
Since the amount of deferred tax assets turned out to be less than the amount of deferred tax liabilities, column 4 on page 1420 will indicate the amount of the excess, namely 330 tr.
Fragment of the Balance Sheet for this case:
- If the company reflects the amount of deferred tax assets (it will not roll up the balance on accounts 77 and 09):
The amount of deferred tax liabilities as of December 31, 2014 will be equal to 396 tr.
Fragment of the Balance Sheet:
How to present income tax in reporting.
[cm. IAS paragraphs 12:71 – 76]
The main issue when presenting income taxes concerns offsets. Can current or deferred tax assets and liabilities be presented as one net amount? Or should I show them separately?
Credit for current income tax.
You can offset current tax assets and liabilities if 2 conditions are met:
- You have a legally enforceable right to set off recognized amounts; and
- You intend to either set off or realize the asset and settle the liability at the same time.
Deferred income tax offset.
You can offset deferred tax assets and liabilities if 2 conditions are met:
- You have a legally enforceable right to offset current income tax assets against current income tax liabilities; and
- Deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on:
- the same taxable company; or
- different taxable entities that intend to settle current tax liabilities and assets on a net basis, or to realize assets and settle liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or offset.
Be careful when preparing consolidated financial statements because often you simply cannot combine a parent's deferred tax assets with a subsidiary's deferred tax liabilities and present them as 1 net amount.
How to reflect liabilities on the balance sheet (postings)
In the balance sheet of companies, deferred debts will be reflected in the Liability section of the “Long-term liabilities” section on page 1420 (if the balance on the 77th account is credit). The balance sheet rules 18/02 allow:
- show the balance on line 1420 in expanded form (you need to demonstrate the balance on Kt account 77 on line 1420 and the balance on Dt account 09 in the Balance Sheet on line 1180 of the section “Non-current assets”);
- reflect the balance in a collapsed form (you need to reduce the credit balance on account 77 by Dt account 09).
Change in deferred liability indicator (posting)
Movements by account 77 are carried out within strictly limited limits, operations can be carried out to reduce or increase the indicator:
| Operation | DEBIT | CREDIT |
| Reduction or full settlement of deferred tax liabilities | 77 “Deferred obligations” | 68.4 “Calculations for income tax” |
| Increasing the cost of debt to increase the amount of income tax | 68.4 | 77 |
| Removal of deferred tax liability from the balance sheet | 77 | 99 “Profits and losses” |
Not only the amount of debt, but also the temporary difference is subject to write-off.
Example of writing off a deferred liability (posting)
The company decided to sell its fixed asset to a partner. At the date of sale the following depreciation charges were observed:
- in accounting – 295 thousand rubles,
- in tax accounting – 387 thousand rubles.
The accountant checks the deferred tax savings in account 77:
- RUB 387,000 – 295,000 rub. = 92,000 rubles,
- 92,000 rub. x 20% = 18,400 rubles.
The following is written off from the balance sheet:
Dt 77 Kt 99 – 18,400 rubles for the amount of the deferred liability.
What we reflect in line 1420 of the balance sheet: deferred tax liabilities
The formation of deductible temporary differences results from income and expenses of an organization that were recognized in accounting in the current reporting period, and for tax accounting purposes - in other reporting periods.
Accounting entries when reflecting a decrease or full repayment of deferred tax assets 68 sub-account “Calculations for income tax” A reverse entry was made to reduce the conditional expense (income) of the reporting period when there was a decrease or complete repayment of recognized deferred tax assets Accounting entries when writing off a deferred tax asset upon disposal of an object asset on which it was accrued Full repayment (write-off) of the value of recognized deferred tax assets upon disposal of the asset for which they were accrued is reflected. Accounting entries when entering initial balances in account 09 “Deferred tax assets” for further application of PBU 18/0284 sub-account “Loss subject to coverage"Reflects the initial balance of the recognized deferred tax assets due to the loss subject to coverageReflection of deferred tax liabilities in accounting.
| Accounting entries when reflecting deferred tax liabilities | |||
| 68 subaccount “Calculations for income tax” | A recognized deferred tax liability is reflected (accrued), which reduces the amount of conditional expense (income) for the reporting period. The deferred tax liability is calculated by multiplying the taxable temporary difference by the income tax rate. The formation of taxable temporary differences results from the income and expenses of an organization that were recognized in tax accounting in the current reporting period, and for accounting purposes - in other reporting periods. | ||
| Accounting entries when reflecting a decrease or full repayment of deferred tax liabilities | |||
| 68 subaccount “Calculations for income tax” | A reverse entry was made against income tax accruals for the reporting period when recognized deferred tax liabilities are reduced or fully repaid | ||
| Accounting entries when writing off a deferred tax liability upon disposal of an asset or type of liability for which it was accrued | |||
| The full repayment (write-off) of the amount of recognized deferred tax liabilities upon repayment of the obligation for which they were accrued is reflected | |||
| Accounting entries when entering initial balances on account 77 “Deferred tax liabilities” for further application of PBU 18/02 | |||
| 84 subaccount “Retained earnings in circulation” | Reflects the initial balance of recognized deferred tax liabilities due to retained earnings in circulation or | ||
| 84 subaccount “Loss to be covered” | The initial balance of the recognized deferred tax liability is reflected at the expense of the loss to be covered if there is no retained earnings | ||
