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I’ll try to find other sources of info and come back with a reply.
However: the Sub already sold it ( it, of course, the inventory) for 10 and it was taxed for 2. The parent has it for 10 but for consolidation purposes will adjust it to 8. Tax base remains 10. When the inventory is sold outside the group, I’ll recognize an expense of 8, but deduct 10. This is a temporary difference. In my opinion.
Once I am clear, I’ll come back to you, either I’m right or wrong.
Hello Mike
And thanks for your answer.
There is a deferred tax: if the Parent bought it ( it, the inventory) for 10 and the cost is 8, than I’ll adjust it at 8 for FS purposes but its tax base remains 10. So this is my question: Shall I adjust the Subsidiary’s equity or the Parent’s ? If I adjust against Sub’s equity, I’ll affect the value of NCI.
What if the Parent is the seller ?
Regards,
Hi Gabriel,
About the first issue: the examiner considers IAS 36. 116 : An asset’s value in use may become greater than the asset’s carrying amount simply because the present value of future cash inflows increases as they become closer. However, the service potential of the asset has not increased. Therefore, an impairment loss is not reversed just because of the passage of time (sometimes called the ‘unwinding’ of the discount), even if the recoverable amount of the asset becomes higher than its carrying amount.
In this question neither the discount rate nor the cash flow has change, therefore – no reversal of impairment. Unlikely ( in my opinion) for normal people to have known this rule ( of course I do not know if there is an explicit example in BPP’s or Kaplan’s book).
The second: IAS 37. 53: Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the
provision.So, I really do not understand why IAS 37. It is an impairment loss and NO LIABILITY. I would have answered: no recognition of an asset as the criteria for recognition according to IAS 20 is not fulfilled with. The only link with IAS 37 is that it may be considered a contingent asset ( which the promise from the Government is actually)
Advice: Practice also the questions for DipIFR https://www.accaglobal.com/gb/en/student/dipifr/dipifr-resources/past-exam-papers.html
