How do I handle deferred taxes in the annual financial statements?
January 8, 2024 | 40,00 EUR | answered by Günther Schmidt
Dear tax consultant,
I am Marco Neumann, managing director of a medium-sized company, and I am facing the challenge of correctly handling deferred taxes in the annual financial statements. I have already done some research, but I am unsure of how to properly record these complex tax obligations.
Our company has generated profits in recent years that have led to deferred taxes. However, we currently have carryforwards from previous years that could lead to a reduction in deferred taxes. I am wondering how to correctly include these carryforwards in the calculation of deferred taxes and how to properly disclose them in the annual financial statements.
I am also concerned that incorrect treatment of deferred taxes could lead to inaccuracies in the annual financial statements and possibly even to tax consequences for our company. Therefore, it is crucial for me to receive clear and understandable guidance on the correct treatment of deferred taxes.
Can you please explain to me how to deal with deferred taxes in the annual financial statements? What steps are necessary to properly consider carryforwards and what implications can result from this? Are there specific regulations or guidelines that I need to follow to avoid incorrect recording?
Thank you in advance for your support and expertise in this complex topic.
Sincerely,
Marco Neumann
Dear Mr. Neumann,
Thank you for your inquiry regarding deferred taxes in the annual financial statements of your medium-sized company. It is understandable that you may feel uncertain about this complex topic and need clear guidance on how to properly handle deferred taxes. I will therefore explain to you in detail how to deal with deferred taxes and what steps are necessary to correctly account for loss carryforwards.
Deferred taxes arise when there are differences between taxable and commercial profits. These differences can arise, for example, from different depreciation methods or provisions. Deferred taxes are the taxes that will need to be paid or refunded in the future to offset these differences.
If your company has generated profits in previous years that have led to deferred taxes, these should be disclosed in your annual financial statements. It is important to consider the amount of deferred taxes and their future development. If your company has loss carryforwards from previous years, these can reduce the amount of deferred taxes. Therefore, loss carryforwards should be correctly included in the calculation of deferred taxes.
To properly account for loss carryforwards, you must first determine the amount of the loss carryforwards and verify if they are still usable for tax purposes. Loss carryforwards can generally be offset against future profits to reduce the tax burden. This offsetting of loss carryforwards with future profits can affect the amount of deferred taxes.
There are certain regulations and guidelines that you must adhere to in order to avoid incorrect accounting of deferred taxes. These regulations may vary depending on the legal form and size of your company. Therefore, it is advisable to seek advice from an experienced tax advisor to ensure that deferred taxes are correctly disclosed in the annual financial statements.
Incorrect treatment of deferred taxes can indeed lead to inaccuracies in the annual financial statements and possibly even tax consequences for your company. Therefore, it is important to carefully review this area and seek assistance from an expert if necessary.
I hope that this information is helpful to you and supports you in correctly handling deferred taxes. If you have any further questions or need assistance, I am at your disposal.
Best regards,
Günther Schmidt
Tax Advisor
