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The note here says, ” Deferred Tax of 1 million arose on the gains on financial assets designated as FVTOCI in the year.
My question is while making a Financial Asset ledger to calculate cash paid, won’t this deferred tax actually reduce the balnace of Financial Asset, since it is a deferred tax liability ?
However the questions adds the 1m tax to opening balance of financial assets. Please can anyone help what point exactly am I missing here. Thank you !
Hi,
I think the key point you’re missing is that the figure given in the SPLOCI is $2 million after tax. If we are then told that the tax is $1 million then the total gain is $3 million, which is what needs to be processes through the financial asset ledger.
The actual tax figure of $1 million is adjusted through the deferred tax account and income tax expense account. It wouldn’t impact the financial asset ledger account. The only reason the adjustment is made in the financial asset ledger is because the gain is after tax when it needs to be the full gain.
Thanks
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