Question: The following issues occured during the past financial year. Please support Mrs Meyer and explain briefly how they are reported in the IFRS and the tax balance sheet. Please present the accounting records of the deferred taxes assuming a tax rate of 30%.
1) a wall of production hall was damaged due to a high groundwater level. in the next financial year, some parts of the wall have to be rebricked. MAN recognized a provision of 500.000€ in its tax balance sheet.
2) MAN is the lessee of an administration building that is not being used anymore due to reorganization. Asublease is not possible. The tenancy agreement has a maturity of 3 years. the present value of the rent expenses for the remaining 3 years is 2.000.000€.
3) MAN uses a declining depreciation method for its machinery for tax purposes and linear depreciation for the IFRS balance sheet. At the end of the year the carrying amount of the machinery is 15.000.000€ according to IFRS and 12.000.000€ according to the tax balance.
4) Due to a special depreciation method for tax purposes the tax base of the inventory has a value of 3.000.000€. the value of the inventory according to IFRS is 3.6m.€
5) MAN applies the revaluation method according to IAS 16 for its building and increases the value by 4.000.000€.
b) how do you account for changes in deferred taxes due to issues which are directly recognized in equity ? Please present your source of information in the annual report of MAN. Edit
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