Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Deferred Tax
- This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
- AuthorPosts
- February 24, 2017 at 6:16 pm #373418
Hello Sir,
How are you?
I am unable to solve 1 question from Bpp for IAS 12 that is making me crazy now.Both are similar questions that includes revaluation and opening balances etc but the treatment to first question is totally different as compares to 2nd question.my answer is correct for the second question.so i have a problem with only first one.i will show you my answers below.Q.trial balance at 31 December 20X3 shows
dr $700,000 on current tax
cr $8,400,000 on deferred tax
Estimated the provision for income tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates to a property revaluation.
What is the profit or loss income tax charge for the year ended 31 December 20X3?
Correct answer is 1.2 millionMy Answer:- under provision + current estimated tax = 4.5 + 0.7 = 5.2
b/f 8.4 – 5.6 = 2.8 decrease in movement of deferred tax
removing Revaluation deferred tax 2.8 – 1.2 = 1.6 Deferred tax
5.2 + (1.6) = 3.6 millionQ.The trial balance at 31 March 20X6 shows
cr $800,000 on current tax
cr $2.6 million on deferred tax.
A property was revalued during the year giving rise to deferred tax of $3.75 million.
This has been included in the deferred tax provision of $6.75 million at 31 March 20X6. The income tax charge for the year ended 31 March 20X6 is estimated at $19.4 million. What will be shown as the income tax charge in the statement of profit or loss of Highwood at 31 March 20X6? $
Correct answer is $ 19 millionMY Answer – current estimated tax – over provision = 19.4 – 0.8 =18.6
movement in D.T = b/f 2.6 – 6.75 c/f = 4.15 million increase
remove Revaluation = 4.15 – 3.75 = 0.4 Deferred Tax
18.6 + 0.4 = 19 million is the answer which is correct i am just showing bcoz i did the same thing above.I know i am doing something wrong and something that i have not still understood it well but i need your full guidance on above questions.
Thank you in advance Sir.
February 25, 2017 at 8:09 am #374098The difference is because in example 1 we have a DECREASE in the deferred tax provision whereas in example 2 we have an INCREASE in the deferred tax position
In both of your answers you have removed the deferred tax on the revaluation by deducting the appropriate amount
But clearly that deduction cannot be correct in both circumstances
In the first example the 1,200 “removal” is in fact an addition to the deferred tax movement in the reported provision figures
OK?
- AuthorPosts
- The topic ‘Deferred Tax’ is closed to new replies.