Peachtree 2015 Annual Report Download - page 139

The Sage Group plc | Annual Report & Accounts 2015 137
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
Sensitivity analysis on significant actuarial assumptions
2015
£m
2014
£m
Discount rate applied to Scheme obligations +/- 0.5% pa 2.1 2.2
Salary increases +/- 0.5% pa 0.9 0.6
11 Deferred income tax
Deferred income tax is an accounting adjustment to provide for tax that is expected to arise in the future due to differences in
accounting and tax bases. In this note we outline the accounting policies, movements in the year on the deferred tax account and the
net deferred tax asset or liability at the year-end.
A deferred tax asset represents a tax reduction that is expected to arise in a future period.
A deferred tax liability represents taxes which will become payable in a future period as a result of a current or an earlier transaction.
Accounting policy
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group
is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based
on tax rates that have been enacted or substantively enacted at the end of the reporting period.
Tax assets and liabilities are offset when there is a legally enforceable right and there is an intention to settle the balances net.
Deferred income tax has been calculated at 20.0% (2014: 20.0%) in respect of UK companies (being the corporation tax rate at which
temporary differences are expected to reverse) and at the prevailing rates for the overseas subsidiaries.
During the year, effective from 1 April 2015, the standard rate of corporation tax in the UK changed from 21% to 20%. On 8 July 2015 the
government announced its intention to reduce the standard rate to 19%, effective from 1 April 2017, with a further reduction to 18% from
1 April 2020. At the 30 September 2015, this change has not been substantively enacted and as such the tax balances below have not
been remeasured to account for these planned changes.
The movement on the deferred tax account is as shown below:
2015
£m
2014
(restated)
£m
At 1 October 10.3 3.1
Income statement credit 14.4 7.4
Acquisition of subsidiaries 2.3 0.3
Exchange movement (1.7) (0.9)
Other comprehensive income/equity movement in deferred tax 1.6 0.4
Transfer from current income tax liabilities ––
At 30 September 26.9 10.3
Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets because
it is probable that these assets will be recovered. A potential deferred tax asset on losses of £10.7m has not been recognised as it is not
expected that these losses will be recovered in the foreseeable future.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12,
“Income Taxes”) during the year are shown below.
The offsetting of these balances is shown within the reclassification line of the notes below. Deferred tax assets and liabilities are only offset
where there is a legally enforceable right of offset and there is an intention to settle the balances net.
Deferred tax assets and liabilities categorised as “other deferred tax” of £22.3m (2014: £19.6m) includes various sundry balances in relation
to temporary differences on fixed assets, accounting provisions / accruals, goodwill amortisation and deferred revenue.