Income taxes: analysis of disclosures II*

Siam City Cement Company (SCCC) is Thailand’s principal cement producer with consolidated 2001 revenues of Baht 16 billion (A360 million). The group was hit by the Asian financial crisis in 1997/98 and resulting devaluation of the baht. It incurred large operating losses in 1998/99 and did not return to profitability until 2000. The operating losses generated tax loss carry forwards which SCCC recognised as a deferred tax asset in its consolidated balance sheet. Key information concerning the tax effect of SCCC’s past losses and current profits is given in Exhibit 17.17: it’s taken from the company’s consolidated accounts for calendar year 2001.

Required

(a) Calculate the group’s effective tax rate for 2001.

(b) Why does the company report deferred but not current tax expense in 2001?

(c) How much tax did the group pay in 2001?

(d) Estimate the group’s current and total tax expense for 2002. Assume the group makes consolidated before-tax profits of Baht 3,320 million (the same as in 2001) and the statutory corporate income tax rate in Thailand remains at 30%. State any other assumptions you have made.

* Assignment draws on material in section 2 of the chapter.

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