- February 29, 2020 at 3:40 pm
i am confused about the answer to question 134 of the BBP Practice and revision kit. The question is as follows:
Jasper Orange co’s trial balance at 31 December 20X3 shows a debit balance of $700,000 on current tax and a credit balance of $8,400,000 on deferred tax. The directors have estimated the provision for income tax for the year at $4.5m abd the required deferred tax provision is $5.6m, $1.2m of which relates to a property revaluation.
What is the tax liability recognised in the statement of financial position for the year ended 31 Dec 20X3?
The answer given is $1.2m broken down as follows:
Prior year underprovision 700
Current Provision 4,500
movement of deferred tax (2,800)
Deferred tax on revaluation surplus (1,200)
Why have they included the deferral for the revaluation surplus if they already stated that the required 5.6m of deferred tax required includes the 1.2m?March 4, 2020 at 7:45 pm
The movement on the deferred tax provision is usually taken through profit or loss, unless there is a revaluation of PPE. Any deferred tax on PPE is taken through OCI, to match up with the gain on revaluation being recognised there too.
So in this example the $1.2m is taken through OCI, and any remaining movement through profit or loss.
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