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Deferred tax (IAS 12) – Accelerated capital allowances – ACCA (SBR) lectures

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  7. Hi

    So, considering the following

    Depreciation charged on asset for the current year is 20 000$ as per companies policy.
    But depreciation charged for the asset as per tax rules is 37 500$. Tax rate is 20%

    So it means there is a tax savings of

    4 000$ (20 000*20% as per company policy) &
    7 500$ (37 500*20% as per tax rules)

    Does this not mean that i have a deferred tax asset of 3 500$ and not a deferred tax liability as i have charged lower depreciation (20 000$) as against the depreciation per the tax rules (37 500$)

    • The fact is that the CA charged is faster than the depreciation lead to tax differences (and deferred tax liability where CV is greater than the TB). Means the entity is enjoying more tax deduction now and less in future thus form a deferred tax liability.

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