You are Rebeca Lemus, CFO of Inmobiliaria Centroamérica (InmCA), a housing developer listed on the San Salvador stock exchange. The auditor has just objected to the company's 2023 deferred taxes, and on Tuesday 5 November you sit down with the banks preparing a US$80 million bond issue. Before that meeting you must decide which tax rate you will measure those taxes at.
The situation
It is Thursday 31 October 2024, 4:40 in the afternoon. Martín Recinos, the engagement partner at Halvorsen Ibarra, leaves his findings on your desk: InmCA's deferred taxes are miscalculated and misclassified, and his firm will sign nothing without a restatement of the 2023 statements, which will take four to six weeks. The company is adopting IFRS this year, as the exchange requires of listed firms.
At the end of 2023, under local accounting rules, InmCA reported assets of US$280 million, liabilities of US$195 million and equity of US$85 million. The liabilities include a deferred tax liability of US$5.8 million, computed at 30%; there is no deferred tax asset at all. The auditor's working paper flags four items: two construction projects with US$2.1 million each on the deferred-tax-asset side, never recorded; an investment property that cost US$20 million and is now worth US$24 million; and a difference of about US$4.8 million from accelerated tax depreciation on fixed assets.
Then there is the rate. The local-GAAP statements assumed 30%. The tax team has confirmed that the rate that applies to InmCA is 28.6%. And one member of that same team argues for 25%: the differences will take years to reverse, and the Assembly is debating a reform that would lower the rate for housing developers.
The Marroquín family, which owns 70% of the shares, wrote that same afternoon: the bonds must go ahead as planned, because a two-month delay could cost US$5 to 10 million on the projects under construction. The announcement is set for 15 November, and the treasurer has just forwarded the banks' agenda. Its first item reads: "2023 figures for the prospectus".