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kindly help !
HIGHWOOD
The following trial balance relates to Highwood at 31 March 20X1:
Current tax (note (iii)) Cr 800
Deferred tax (note (iii)) Cr 2,600Current tax represents the under/over provision of the tax liability for the year ended
31 March 20X0. The required provision for income tax for the year ended 31 March
20X1 is $19.4 million. The difference between the carrying amounts of the assets of
Highwood (including the property revaluation in note (ii) above) and their (lower) tax
base at 31 March 20X1 is $27 million. Highwood’s rate of income tax is 25%.revaluation goes like that
land 5000 & property 10000* my question is when i want to calculate the tax that i should deduct from revaluation surpluses and the tax charge to SPL why should i include the land since there is no depreciation on it and the deferred tax come from the deference between the depreciation and capital allowance
why is goes like this by including the land ??
– as the revaluation surplus is 11250
– tax charge to SPL is 400Hi,
The deferred tax does not come from the difference between the depreciation and the capital allowances. This is thinking under the old standard’s rules. We now look at the carrying value of the asset and compare this to the carrying value to get the temporary difference, hence why the land value will have been included.
Thanks
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