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Taxation of fair valuing derivatives
In Ireland, the tax rules follow the accounting rules. Therefore where the derivatives are recognised in the profit and loss they are taxable/tax deductible however where they are recognised in other comprehensive income they are not.
Therefore in the majority of cases there will be no deferred tax impact where the adjustments are posted to the profit and loss account. However on transition to FRS 102 if as a result of transition adjustments, they have fallen out for tax purposes, these will be taxed/tax deductible over a five year period.
Where hedge accounting is applied and the adjustments are posted through other comprehensive income, deferred tax will arise on these adjustment as these will not be taxable/tax deductible until the adjustments are recycled to the profit and loss. The deferred tax adjustment is posted to other comprehensive income.
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