Deferred Tax on PPE written down

This topic has 2 replies, 2 voices, and was last updated 9 months ago by alawi sayed.

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September 2, 2021 at 1:51 pm #633984
alawi sayed
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Hello Sir,

Incase of PPE being written down the difference between the fare value and the carrying amount
should be used for the calculation of the deferred tax .
Here because the carrying value is more than the fare value there is a loss ,so the deferred tax should negative

The difference in fare value was 8515k loss at 20% gives us deferred tax of 1703k

the deferred tax balance was credit of $1500k

the difference was 203k

but I don’t know why they deducted the difference instead of adding to the profit,

from FR Sep/Dec 20 sample CBE ,ACCA site(I could not copy the question and the answer)

Thanks,

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September 5, 2021 at 12:37 pm #634431
P2-D2
Keymaster
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Hi,

It all depends on the $1,703k figure, as if this is a credit balance, then there is an increase in the credit balance from $1,500k and so the other side of the entry would be an expense through profit or loss. This would therefore mean that the amount is deducted from the profit.

Hope that fixes it up for you.

Thanks
September 5, 2021 at 3:19 pm #634472
alawi sayed
- Topics: 138
- Replies: 148
Hi Sir,

But this $ 1703k was result of applying the rate on the loss of $8515 so we have a negative tax of $1703 and credit balance of $1500k so what we add the difference or deduct.

Thanks,
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