An overseas P2 ‘Corporate Reporting’ student has sent in a query to AccountancyStudents this week as follows:

“I am looking at a question where the share-based payment value for financial statement purposes is $zero in the current year even though it vests in the current year.  The value is also $nil in the comparative year, yet when I look at the same transaction’s tax base there is a value attached to it.  Why is this?”

The reason that the accounting value of the share-based payment is zero is because of the principles with which IFRS works.  IFRS is very much geared towards the statement of financial position (in other words IFRS takes a balance sheet approach) - specifically IAS 12 ‘Income Taxes’.

The financial statements will not actually contain an asset or a liability in respect of the share-based payment but regardless of this, there is still a future tax benefit available to the entity.  As a result, the financial statements will not actually recognise an asset but the “tax accounts” will recognise a value (its tax base) which then results in a taxable temporary difference which is recognised within the financial statements as a deferred tax asset.