FRS 102 ― specific deferred tax issues

Produced by Tolley in association with

Corporation Tax

Guidance

Voluntary revaluations of property, plant and equipment

Under FRS 102, gains and losses on revaluation of property, plant and equipment are recognised in the statement of other comprehensive income, which is outside of the income statement. These are revaluations of tangible assets which are held for use in the production or supply of goods or services or for administrative purposes (eg the head office of the company).

Deferred tax must be recognised assuming a sale of the property at the reporting date, using the tax rates and allowances that apply to the sale of the asset.

The initial deferred tax asset or liability and any change in the balance in subsequent accounting periods is recognised in ‘other comprehensive income’ to match the valuation adjustment giving rise to it.

See Example 1.

Measurement of investment property after initial recognition

FRS 102 permits two accounting treatments for an investment property as follows:

1)
if fair value can be measured reliably without undue cost or effort, the investment property should not be depreciated.

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Malcolm Greenbaum

Director and Principal Trainer at Greenbaum Training and Consultancy Limited

Malcolm is a UK Chartered Accountant and Chartered Tax Advisor winning the John Wood Medal in the November 1995 CIOT sitting for the best paper on business taxation. He was previously Director of Finance and Taxation Programmes at BPP Professional Education and has delivered IFRS, US GAAP, UK Tax and VAT training (at all levels from an introduction to the complexities of IAS 39) to a multitude of organisations world-wide since 1992. Malcolm has particular experience in delivering bespoke training programmes to multi-nationals in the financial services, transport and energy sectors as well as delivering UK tax and VAT update programmes to accounting and law firms. He is passionate about training and his enthusiasm ensures that the participants enjoy the learning experience whilst gaining knowledge through their engagement in the sessions and through encouraging them to ask questions and discuss practical issues they may have. Malcolm also provides consultancy services to companies and accounting firms, including provision of VAT advice, reviewing accounting policy manuals and advising on accounting treatments of various transactions. In his spare time, Malcolm enjoys flying having gained a Private Pilot's Licence in 2014.

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