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Hi, Sir from Mar/Jun 2019 Q2 c)
The directors of Hudson wish to recognise a material deferred tax asset in relation to $250 million of unused trading losses which have accumulated as at 31 December 20X2. Hudson has budgeted profits for $80 million for the year-ended 31 December 20X3. The directors have forecast that profits will grow by 20% each year for the next four years.The market is currently depressed and sales orders are at a lower level for the first quarter of 20X3 than they were forthe same period in any of the previous five years. Hudson operates under a tax jurisdiction which allows for trading losses to be only carried forward for a maximum of two years.
Answer from third paragraph: The deferred tax asset is based upon forecasts for too long a period.
Which year have they been using?
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