- 10 Marks
PSAF – L2 – Q8.1 – International Public Sector Accounting Standards
Question
As at 31st December 2024, corporate tax assessments amounting to NGN170 million were still outstanding to be paid by corporate entities to the Federal Government of Nigeria, whilst the total amount owed to the Federal Government of Nigeria as at 31st December 2024 in respect of taxes on goods and services stood at NGN140 million. It is estimated that, only 85% and 90% of the outstanding corporate taxes and taxes on goods and services respectively may be recovered.
Required:
Detail out the accounting treatment of tax revenue for the year ended 31st December 2024.
Answer
The amount of tax revenue to be recognised is as follows:
| NGN million | |
|---|---|
| Corporate tax due to government | 170 |
| Taxes on goods and services due to government | 140 |
| Total tax revenue | 310 |
Provision for uncollectible tax revenue is as follows:
| NGN million | |
|---|---|
| Corporate tax revenue uncollectible (0.15 * 170) | 25.50 |
| Taxes on goods and services uncollectible (0.10 * 140) | 14.00 |
| Total provision for uncollectible revenue | 39.50 |
Accounting treatment
The tax revenue of the Federal Government of Nigeria is accounted for under IPSAS 23: Revenue from Non-Exchange Transactions. The total tax revenue of NGN310 million should be recognised gross in the statement of financial performance for the year ended 31st December 2024.
Further provision for uncollectible revenues should be accounted for in accordance with IPSAS 19: Provisions, Contingent Liabilities and Contingent Assets. The total provision of NGN25.5 million should be recognised as an expense (classified as other expenses) and netted against the tax revenue receivable of NGN310 million, which will be NGN284.5 million.
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