Change in tax rates
Vansatia Construction Inc. uses the completed contract method for tax purposes and the percentage completion method for accounting purposes Assume that on July 15, 2020, a new income tax rate is enacted that lowers the corporate rate from 30% to 28%, effective January 1, 2022. Vansatia Construction Inc. has one temporary difference at the beginning of 2020 related to $ 1 million tax deferral from using the completed contract method. Vansatia therefore had a Deferred Tax Liability account at January 1, 2020 with a balance of $ 300,000 ($ 1,000,000 × 30%). The $ 1,000,000 in gross profit recognized to date is expected to be taxed in 2023.
Instructions
a) Calculate the deferred tax liability at July 15, 2020 after taking into account the change in tax rates and prepare the related journal entry at that date.
b) Discuss if the impact of the change in rates is required to be disclosed or not under IFRS and ASPE.

Question

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The Answer of Change in tax rates
Vansatia Construction Inc. uses the completed contract method for tax purposes and the percentage completion method for accounting purposes Assume that on July 15, 2020, a new income tax rate is enacted that lowers the corporate rate from 30% to 28%, effective January 1, 2022. Vansatia Construction Inc. has one temporary difference at the beginning of 2020 related to $ 1 million tax deferral from using the completed contract method. Vansatia therefore had a Deferred Tax Liability account at January 1, 2020 with a balance of $ 300,000 ($ 1,000,000 × 30%). The $ 1,000,000 in gross profit recognized to date is expected to be taxed in 2023.
Instructions
a) Calculate the deferred tax liability at July 15, 2020 after taking into account the change in tax rates and prepare the related journal entry at that date.
b) Discuss if the impact of the change in rates is required to be disclosed or not under IFRS and ASPE.

Change in Tax Rates