ACCT 2208 · Further Technical Standards · Deferred Tax, Employee Benefits, Impairment

Led by Fra Luca de Pacioli Simulacrum, with Dorothy Rigour Simulacrum on policy choice and integration

1. Module 8 ○ Open

   Further Technical Standards · Deferred Tax, Employee Benefits, Impairment

   Led by Fra Luca de Pacioli Simulacrum, with Dorothy Rigour Simulacrum on policy choice and integration

   The question

   The closing technical module integrates three further IFRS standards essential to UK listed-group reporting: IAS 12 deferred tax (temporary differences between accounting and tax bases), IAS 19 employee benefits (defined-benefit pension accounting with service cost, net interest, and remeasurements through OCI), and IAS 36 impairment of assets (the recoverable-amount test for goodwill and CGUs). The integrated scenario tests an acquired-business CGU including goodwill, customer-relationship intangibles, brand, and a right-of-use asset — and walks through the impairment recognition and its deferred-tax implications.

   Outcome

   The student can perform a deferred-tax calculation on a balance sheet at year-end including temporary differences from depreciation, leases, share-based payments, and acquired intangibles; can articulate the structure of defined-benefit pension accounting; can perform a basic impairment test of a CGU including goodwill allocation; and can integrate the three standards with the prior seven modules' standards. (Further technical IFRS)

   Begin the course → Mark module complete Print certificate of completion

   Practice scenarios

   Halberd Plc Year-End Integrated Audit Working Paper

   You work the integrated impairment review of the Lance Manufacturing CGU at year-end one year after acquisition — goodwill £23m, customer-relationship intangibles £17m, brand £8m, right-of-use asset £6m — under deteriorating trading conditions. The work tests IAS 36 recoverable-amount calculation, the allocation of impairment across CGU components, and the deferred-tax consequences of the recognised £11.1m write-down.

   Your goals

   • Calculate value-in-use: project Lance's cash flows for 5 years using the management forecast (assume £4.8m → £5.0m → £5.4m → £5.8m → £6.0m EBITDA growing 3% per year, less working-capital and capex), apply terminal value at year 5 with 2.5% perpetual growth, discount at pre-tax WACC of 9%. Recoverable amount calculated to (illustratively) £62m.
   • Calculate fair-value-less-costs-of-disposal: comparable transaction multiples or DCF; assume £58m.
   • Recoverable amount: max(£62m, £58m) = £62m.
   • Impairment loss: £73.1m − £62m = £11.1m.
   • Allocation: to goodwill first up to £23m; impairment £11.1m fully absorbed by goodwill; goodwill carrying amount written down to £11.9m.
   • Calculate the deferred tax effect: the goodwill impairment is not deductible for UK corporation tax (goodwill amortisation is generally not deductible for tax under current rules); no deferred tax impact on the impairment.
   • Frame the audit working paper: the impairment trigger, the management's value-in-use model, the audit challenge of key assumptions (growth rate, discount rate, terminal value), the recommended impairment.
   • Rigour Simulacrum's voice on the integration: *the impairment work tests every IFRS standard from the previous seven modules — IFRS 3 goodwill, IAS 38 intangibles, IFRS 16 right-of-use, IAS 36 the test itself, IAS 12 the tax effect; this is why Stage 3 closes here*.

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