Annual Report for 2006/07 - Metro Tasmania

18(s) Prior period correctionRecognition of deferred tax balancesCorrection of prior period errors are reported in accordance with Accounting Standard AASB 108 – Accounting Policies, Changesin Accounting Estimates and Errors. In accordance with this standard, correction of prior period amounts shall be undertakenretrospectively in the first financial report authorised for issue after their discovery.The Company is required to recognise the measurement and disclosure of amounts of elements of financial statements as if a priorperiod error had never occurred.Nature of prior period correctionAs at 30 June 2005, the Company did not recognise any deferred tax assets and deferred tax liabilities as required by AccountingStandard AASB 112 Income Taxes on the basis that the company was a “not for profit” entity and as a consequence its intentionwas not to generate profits that would be subject to tax . Metro’s contract with the Tasmanian Government is based on a“breakeven” financial outcome each year.On reconsidering AASB 112 and the reasons for not recognising deferred tax balances previously, the directors now believe thatthe company should have recognised deferred tax assets and deferred tax liabilities. AASB 112 is a sector-neutral standard, andon this basis it applies to both for-profit and not-for-profit entities. In addition, AASB 112 stipulates that the consideration of currentand future tax consequences of assets and liabilities should be based on the taxable profits (losses) of the entity. The company’sassessment of these factors in the prior year’s was focussed on accounting profit (losses). Further, on transition to A-IFRS on 1 July2004, the test for recognising deferred tax balances changed from “virtually certain” to “probable” which is a less stringent test. Areview and reconsideration of information and facts that were available on transition has indicated that there was sufficient evidenceto indicate that the company should have recognised its deferred tax balances.In accordance with AASB 108 – Accounting Policies, Changes in Accounting Estimates and Errors, the company elected to correctthe oversight as at the date of transition to A-IFRS, being 1 July 2004, by restating the opening balances of assets, liabilities andequity for the 30 June 2006 financial year.The effects are:1 July 2004The recognition of tax balances by including deferred tax assets of $9,571,000 and deferred tax liabilities of $4,175,000. This alsoresulted in an increase in retained profits of $6,576,000 and a decrease in the asset revaluation reserve of $1,180,000.30 June 2005The recognition of the movement in deferred tax balances with an increase to deferred tax assets of $1,148,000, a decrease tothe deferred tax liabilities of $249,000, an increase to the asset revaluation reserve of $99,000, an increase in retained profit of$1,298,000, an increase to income tax expense recognised in the income statement of $211,000 and an increase to income taxbenefit recognised in equity of $635,000.Notes to the Financial Statements30 June 2006The recognition of the movement in deferred tax balances with a decrease to deferred tax assets of $943,000, a decrease tothe deferred tax liabilities of $118,000, an decrease to the asset revaluation reserve of $215,000, a decrease in retained profitof $610,000, an increase to income tax expense recognised in the income statement of $46,000 and an increase to income taxexpense recognised in equity of $547,000.