Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p47
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 47/61)
Character Range: 157037–160372

A recognises the deferred tax in other comprehensive income to the extent that the deferred tax results from foreign exchange translation differences that have been recognised in other comprehensive income (paragraph 61A of the Standard). A discloses separately:
(a) the amount of deferred tax that has been recognised in other comprehensive income (paragraph 81(ab) of the Standard); and
(b) the amount of any remaining temporary difference which is not expected to reverse in the foreseeable future and for which, therefore, no deferred tax is recognised (see paragraph 81(f) of the Standard).

Example 4 – Compound financial instruments
An entity receives a non-interest-bearing convertible loan of 1,000 on 31 December X4 repayable at par on 1 January X8. In accordance with AASB 132 Financial Instruments: Presentation the entity classifies the instrument's liability component as a liability and the equity component as equity. The entity assigns an initial carrying amount of 751 to the liability component of the convertible loan and 249 to the equity component. Subsequently, the entity recognises imputed discount as interest expense at an annual rate of 10% on the carrying amount of the liability component at the beginning of the year. The tax authorities do not allow the entity to claim any deduction for the imputed discount on the liability component of the convertible loan. The tax rate is 40%.
The temporary differences associated with the liability component and the resulting deferred tax liability and deferred tax expense and income are as follows:
                                        Year
                                        X4        X5        X6        X7

Carrying amount of liability component  751       826       909       1,000
Tax base                                1,000     1,000     1,000     1,000
Taxable temporary difference            249       174       91        –
Opening deferred tax liability at 40%   0         100       70        37
Deferred tax charged to equity          100       –         –         –
Deferred tax expense (income)           –         (30)      (33)      (37)
Closing deferred tax liability at 40%   100       70        37        –

As explained in paragraph 23 of the Standard, at 31 December X4, the entity recognises the resulting deferred tax liability by adjusting the initial carrying amount of the equity component of the convertible liability. Therefore, the amounts recognised at that date are as follows:
Liability component              751
Deferred tax liability           100
Equity component (249 less 100)  149
                                 1,000

Subsequent changes in the deferred tax liability are recognised in profit or loss as tax income (see paragraph 23 of the Standard). Therefore, the entity's profit or loss includes the following:
                                     Year
                                     X4       X5       X6       X7
Interest expense (imputed discount)  –        75       83       91
Deferred tax expense (income)        –        (30)     (33)     (37)
                                     –        45       50       54

Example 5 – Share-based payment transactions
In accordance with AASB 2 Share-based Payment, an entity has recognised an expense for the consumption of employee services received as