Question

Air France, a French company, prepares its financial statements according to IFRS. AF’s annual report for the year ended March 31, 2011, which includes financial statements and disclosure notes, provided with all new textbooks. This material also is provided in AF's "Registration Document 2010-11," dated June 15, 2011 and is available at www.airfranceklm.com

Required:

1 – Where in its March 31, 2011, balance sheet does AF report deferred taxes? How does this approach differ from the way deferred taxes are reported using U.S. GAAP? Using the Internet, determine how deferred taxes would be reported using IFRS at the time of your research. Explain why that approach might differ from the way AF reported deferred taxes at March 31, 2011.

2 – Here’s an excerpt from one AF’s notes to its financial statements:

Deferred taxes (in part)

The Group records deferred taxes using the balance sheet liability method, providing for any temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The tax rates used are those enacted or substantively enacted at the balance sheet date.

*Answer the following question:

Is this policy consistent with U.S GAAP? Explain.

3 - Here’s an excerpt from one AF’s notes to its financial statements:

Deferred taxes (in part)

Deferred tax assets related to temporary differences and carry forwards are recognized only to the extent it is probable that a future taxable profit will be available against which the asset can be utilized at the tax entity level.

*Answer the following question:

Is this policy consistent with U.S GAAP? Explain.