Deffered tax - more to follow later on other interesting accounting issues31 Dec 2022 08:54
Morning all
I have spent the last few hours trying to untangle / understand the Tailwind transaction.
Tailwind is a holding company, and all the producing assets were transferred to a subsidiary called Tailwind Mistel in mid-2019.
The accounts of both companies deem it a management requirement to assess the ongoing carrying value of any deferred tax asset.
Pages 32 and 33 Note 9 of Mistrals accounts 31st December 2021 should be of interest.
“Tailwind Mistel has unutilised losses of $609m (2020 $685m) and the forecast profits of Tailwind Mistral Operations are sufficient to allow this deferred tax to be recognised in full” So far so good !!
The accounts themselves only show a deferred tax asset of $83m (this would be a benefit to Serica on acquisition) which has been determined by Mistral Directors. Why ?
Answer because the company has taken advance capital allowances on earlier activity it has created a deferred tax liability. The accounts show
DT liability being accelerated capital allowances = ($223m)
DT asset from $609m losses effective rate 39% = $242m
Other DT assets re timing differences = $64
Overall asset on 31st December 2021 = $83m
Based on all published information the professional opinions of both Tailwind Directors and Auditors the maximum benefit to any aquirerer of Tailwind would be $83m at Dec 2021.
With 2022 being a year of super profits I doubt anything positive on tax is left for Serica.
The RNS quotes the source of the figures below as tax returns.
Its completely disingenuous and just not right to ignore the accounting view and the deferred tax liabilities from accelerated capital allowances which we will have to pay.
Sorry but the inclusion of the note on tax losses stinks of desperation to try and sweeten a terrible deal. No wonder the FD didn’t say anything.
Tailwind had some $1,366 million of brought forward UK Ring Fence Corporation Tax losses and $1,202 million of Supplementary Charge losses as of year-end 2021[10].
Sign In
Follow the stocks
