An entity recognizes deferred taxes on the gain or loss on derivatives designated as cash flow hedges due to the different accounting treatments of these derivatives under IFRS and for the purpose of the tax calculation. During the current accounting period, a loss on derivatives designated as cash flow hedges was recognized in other comprehensive income. The entity has chosen to present two statements: a separate statement of profit or loss and a statement of comprehensive income. Where should the entity recognize tax consequences of this loss during the current accounting period?
A. In the statement of changes in equity
B. In the cash flow statement
C. In the statement of profit or loss
D. In the statement of comprehensive income
D. In the statement of comprehensive income
The tax consequences of the loss on derivatives designated as cash flow hedges that is recognized in other comprehensive income should be presented in the statement of comprehensive income, consistent with the treatment of the underlying item to which the tax effect relates. Therefore, the tax effect of the loss on the derivative would be reported in the same statement, which is the statement of comprehensive income. This presentation allows users of the financial statements to see both the original loss on the derivative and its related tax effect in one place, providing a complete picture of the entity's comprehensive income for the period.
