2) Julian began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purpose as it was incurred. None of the expenditure had been amortised by the year end.
3) Julian’s statement of profit and loss showed interest income receivable of $55,000, but only $45,000 of this had been received by year end. Interest income is taxed on a receipts basis.
The corporate incone tax rate recently enacted for the following year is 30% (unchanged from the previous year)
answer: 2)carrying value is 60000 tax base 0 (zero)
3) carrying value 10000 and tax base is zero
sir could you explain why tax base is zero here and why carying value is( 3)10000 .
tax base according to tax purpose
can you explain a) how to calculate tax base usually ?
b) interest income taxed on receipt basis how tax base and carrying value is calculated ?
c) current liabilties include accrued expense with cv of 2000 if related expense has already been deducted for tax purpose then what is tax base ( ans isTB 2000 NO TEMPRARY difference why?
if already deducted means ?
thank you in advance sir
Ask the Tutor ACCA FR
deferred tax
Cv 60,000 because that's the value in the accounting records. Zero tax base because full allowance has been given "expenditure was deducted for tax purposes as it was incurred" ie no further amount can be claimed as a tax deductible expense
Dr receivable 55,000 Cr interest income 55,000
Dr cash 45,000 Cr receivable 45,000
Cv 10,000 asset receivable
Taxed on a receipts basis - the remaining 10,000 will be taxed next year so no tax liability nor tax asset associated with this 10,000. When received, it will be taxed in the year in which it is received
Very simply, for an asset, the calculation is what value of that asset is still available to be set off against profits in order to reduce taxable profits. In other words, how much of the original cost of the asset has not yet been claimed by way of capital allowances
In F7 the figure will (most probably) be given to you.
Carrying value? It's the book value according to the accounting records
Tax base? As explained above, it's the amount of the original cost not so far been claimed against profits and which is claim able in the future against future profits
Not all assets are tax allowable. For example, typically goodwill is not tax deductible
Ok?
thank you so much sir
You're welcome
Hi Mike !
Today, i have just gone through this forum. I have question on this
How do we present ? Can we offset the balances for deferred tax asset and liabilities ??
Deferred tax liability-.3*10,000=3,000
Deferred tax asset-.3*60,000=1,800
Non current liability
Deferred tax liability -1,200
Do standards allow ?
As a general principle, there shall be a minimum of netting off.
Deferred tax assets and deferred tax liabilities can only be offset off in the statement of financial position if the entity has the legal right to settle current tax amounts on a net basis and the deferred tax amounts are levied by the same tax authority on the same entity
The treatment of current tax assets and liabilities is that they may be set off if the entity has the legal right and the intention to settle on a net basis
Ok.
Thanks, i got the point !
You're welcome
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