Deferred taxes - Applications and models

Deferred taxes represent good quality accounting information if related calculations are based on complete and consistent methods. Adequate frameworks or models can support the completeness and consistency of deferred tax calculations and contribute to the reliability of deferred taxes presented in IFRS and US GAAP reports.

We developed a comprehensive framework for deferred tax calculations in a form of computer assisted model which can be tailored to any IFRS and US GAAP report structure. Our deferred tax model enhances the efficiency of deferred tax accounting with the following attributes:

• assures completeness of deferred tax calculations through balance sheet approach;
• automatically allocates deferred tax assets and liabilities;
• automatically posts deferred taxes into IFRS and US GAAP balance sheet and income statement;
• complies with IFRS and US GAAP classification and presentation requirements;
• provides methodological reference in future applications;
• assures transparency of deferred tax calculations;
• supports the audit trail.

In lack of proper framework, the following difficulties may incur:

• incomplete allocation of temporary differences due to inadequate records;
• ineffective follow up of previous calculations due to weak monitoring procedures;
• reconciliation differences in opening deferred tax balance due to lack of reference to prior IFRS and US GAAP adjustments;
• lack of transparency due to “invisible” processing of deferred tax calculations in existing reporting systems.