Dear Tutor,
I am going to take P2 in the following session.
Now I am going through the IASs.
At the time of studing deferred tax I have found somes complexities to understandand the principle.
let me show you the problem
The IAS 12 says that there will be a deffered tax liability if the carrying value is greater than tax base.
I like to know why there will be a deferred tax liability instead of defrred tax asset in this circumstance?
Because the increased value of carrying value means that depriciation is lower than capital allowance(tax depriciation).
If this is the case, then we have paid more tax according to the accounting profit as the accounting profit is higher than taxable profit.
As a result a deferred tax asset asset should raise instead of deferred tax liability for the following year.
Am not I right,sir??
I need the clerification badly.
Please do help me clear the concept.
Thank you.
Ask the Tutor ACCA SBR
Deferred Tax
11y ago#1"The IAS 12 says that there will be a deffered tax liability if the carrying value is greater than tax base.
I like to know why there will be a deferred tax liability instead of defrred tax asset in this circumstance?"
Because we shall be claiming against our accounting profits depreciation of the carrying value of, say, $200,000 but the taxman will only allow us, say, $150,000 tax written down value. Effectively, we have already had $50,000 more in allowances than we have depreciated and this differential has to catch up
"then we have paid more tax "
No, we have paid less tax because instead of charging, say, $75,000 against our profits, the taxman has said "Here, we shall let you have capital allowances of $125,000.
The difference is caused by depreciation rates used by companies being different than capital allowance rates given by the taxman. were we all to use 25% reducing balance as a depreciation method on our PPE, then deferred tax issues would be dramatically reduced!
Hope that helps
i have some problems with a kit question COHORT which is related to defferd tax..will u please explain it?
11y ago#3I have (at least) two problems helping you with Cohort.
1 I don't have an exam kit available that includes Cohort
2 You haven't given me an exam reference
3 You haven't told me what your problems are, and
4 Even if you do give me an exam reference, I'm going to have problems answering because I'm working from an IPad away from home and a large screen for me to view the question without having to keep scrolling up / down / sideways
Will your question wait until next week for me to answer it?
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