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Let say that i buy an asset on 1 october 2011 for USD 1,000,000. useful life is 5 year residual value is 0.
capital Allowance is 50% in the first year and 20 % in the next 2 years.
Tax rate at 25%calculate the deferred tax at 31 december 2012.
Can anyone help me plz
Accounting value year 1 is 1,000,000-200,000 = 800,000.
Tax Written Down Value is 1,000,000-500,000 = 500,000.
Therefore accounts are overstated by 300,000 and deferred tax prov is 300,000. That’s my simple understanding?
Carrying it forward.
Accounting value year 2 = 600,000
Tax Written Down Value if 300,000 (assuming straight line) and therefore provision remains at 300,000 so no movement to P&L.
Year 3 – Accounting value = 400,000
Tax Written Down Value = 300,000. Deferred tax is now 100,000 so Dr SOFP Deferred tax with 200,000 and credit P&L.
Prob best to ask the tutor and use that forum but this is my brief understanding.
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