In 2015 Charmed,Inc.recorded book income of $370,000.The company's only temporary difference relates to a $60,000 installment sale that it recorded for book purposes; there are no permanent differences.Charmed anticipates receiving payments equally over the following three years.The current enacted tax rate in 2015 is 35%.The substantively enacted tax rates for the following three years are 30%,35%,and 38%,respectively. Under IFRS,what deferred tax amount should Charmed record for this temporary difference?

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The temporary difference is $60,000 and the enacted tax rate is 35%. Therefore, the deferred tax liability is $21,000 ($60,000 x 35%). However, since there are different tax rates in the following years, the liability must be remeasured at the end of each reporting period based on the tax rate that will be substantively enacted. Using these rates, the liability should be remeasured to $20,600 ($60,000 x 30%) at the end of year 1, to $21,000 ($60,000 x 35%) at the end of year 2, and to $21,600 ($60,000 x 38%) at the end of year 3. Therefore, the total deferred tax liability for the temporary difference is $63,200 ($21,000 + $20,600 + $21,600).