Projecting financial statements - tax loss carryforwards query
I'm building an integrated financial statement. I've got two years worth of historic data & I'm supposed to project for the next three years. Unfortunately, some parts of the information provided in the historical data set is purposefully wrong and I need to restate these figures before proceeding with my forecasts. One of them..
Year 1 - EBIT (-1500) & EBT (-3000) are negative.
Year 2 - EBIT (3000) & EBT (1000) are positive. Balance Sheet (Liability --> Tax - 100), CFS (Tax --> 200)
Note - The question does not provide the corporate tax rate nor the country of operations for the company.
Due to year 1 loss, there will be a tax loss carry-forward (i.e. DTA). However, in year 2, the Cash Flow Statement shows that tax expense has been paid on year 2 EBT and a 'Tax' liability created in the balance sheet.
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Why the tax was paid in year 2 as nol from year 1 is greater than net income in year 2. This would mean no tax needs to be paid in year 2.
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I'm unable to figure out how this deferred tax liability has been created in year 2 BS, and
Hence, how do I account for the tax loss carryforward from year 1, when tax has been paid and recorded in year 2 financial statements?
