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Yes Mike. i am fine with this. thank you very much and have a nice day.
I wish you Merry Christmas and a Happy 2017!
Hi Mike, glad that you know this very basic Greek phrase ! My apologies for the first post, i thought it was probable that you wont see it so i posted it here. Again, my apologies.
Actually this is the consolidation question from Diploma IFRS June 2014 exam paper. here is the link (page 4, Note 2):
and the answer :
no deferred tax on working 8 only recognition of the contingent liability movement of 4 million in working 4
this is a consolidated Profit & Loss exercise. i have similar issue with the Diploma IFR December 2016 exam, here it is consolidated Statement of Financial Position and i do not know whether to account for for deferred tax arising from the contingent liability
i have not found anything for the moment. Official ACCA will post within the next weeks. if you find anything, please let me know. i will also keep you informed.
Dear Mike, i have recently gone through a business combination exercise. It was for the ACCA Diploma IFRS in June 2014.
In note 2 of the paper, there was one subsidiary in which we had to account for two fair value adjustments (PPE and an intangible asset) and also we had to consider a contingent liability. Also, In this note it was mentioned that FV adjustments were subject to deferred tax.
The paragraph for the contingent liability is following:
“On 1 July 2013, Gamma had a contingent liability which it did not recognise in its own financial statements. This contingent liability still existed, and was still unrecognised by Gamma, at 31 March 2014. As at 1 July 2013, the directors of Alpha believed that the contingent liability had a fair value of $16 million. On 31 March 2014, they reassessed its fair value at $12 million. The reassessment was due to a change in circumstances after 1 July 2013.”
Going through the answer i noticed that:
– deferred tax movement was recognized for PPE and the intangible asset (due to depreciation of course, as depreciation decreased the carrying amount of these two assets – i agree with this treatment)
– no deferred tax movement was recognized for the contingent liability although the fair value changed from 16 to 12 million. only this difference of 4 million was recognized in consolidated Statement of Profit & Loss. not any deferred tax.
Why is that ? why deferred tax is recognized in PPE and the intangible asset and not recognized in this contingent liability ?
I would appreciate very much your opinion.
Kind Regards