This excerpt taken from the BP 20-F filed Mar 6, 2007.
(a) Deferred taxation/business combinations
Under IFRS, deferred tax assets and liabilities are recognized for the difference between the assigned values and the tax bases of the assets and liabilities recognized in a purchase business combination. IFRS 3 Business Combinations typically requires the offset to the recognition of such deferred tax assets and liabilities to be adjusted against goodwill. However, under the exemptions contained in IFRS 1 First-time Adoption of International Financial Reporting Standards, business combinations prior to the groups date of transition to IFRS were not restated in accordance with IFRS 3 and the offset was taken as an adjustment to shareholders equity at the date of transition to IFRS.
Under US GAAP, deferred tax assets or liabilities are also recognized for the difference between the assigned values and the tax bases of the assets and liabilities recognized in a purchase business combination. SFAS No. 141 Business Combinations, requires that the offset be recognized against goodwill. As such, the treatment adopted under IFRS 1 as compared with SFAS 141 creates a difference related to business combinations accounted for under the purchase method that occurred prior to the groups date of transition to IFRS.
The adjustments to profit for the year and to BP shareholders equity to accord with US GAAP are summarized below.
The major components of deferred tax liabilities and assets on a US GAAP basis at 31 December were as follows.