Question

Describe the procedure(s) involved in classifying deferred tax amounts on the statement of financial position under IFRS.

Short answer

The nature of deferred tax accounts must be evaluated and classed as net current or net non-current, then total amount of current deferred tax and finally deferred tax amount is reported as non-current assets or liability.

Step-by-step solution

Meaning of IFRS

International Financial Reporting Standards are a collection of accounting standards produced by the International Accounting Standards Board, a non-profit organization (IASB). It is a collection of globally agreed accounting standards that lays out the rules and procedures.

Explaining the procedure(s) involved in classifying deferred tax amounts on the statement of financial position under IFRS.

The classification has to be done as follows:

1. Assign a current or noncurrent status to the deferred tax amount. If an amount is tied to a specific asset or obligation, it must be categorized. Still, if it is not, it must be classified based on the temporary difference's predicted reversal date.
2. Calculate the total amount of different current deferred tax assets and liabilities to arrive at the net current amount. If the net current amount is an asset, report it as a current asset on the balance sheet; if it is a liability, report it as a current liability.
3. Determine the total amount of different noncurrent deferred tax assets and liabilities to arrive at the net noncurrent amount. If the net noncurrent amount is an asset, report it as a noncurrent asset on the balance sheet; if it is a liability, report it as a noncurrent liability.