Deffered tax — OpenTuition Forums

ZZainb7y ago

hi sir, Could u plz explain these clearly 1) the relationship between deffered tax liability and increase in capital expenditure. 2) relationship betw defferred tax and revaluation surplus of ppe Thanks v much

P2-D2Tutor7y ago#1

Hi, I'm not here to simply explain everything, I'd prefer you to ask about specifics that you do not understand that I can then help paint a clearer picture. So if you let me know what it is that you do not understand about each of the above then I can help. Thanks

ZZainb7y ago#2

Hi sir, What i mean us that hust a brief example/explain On how increase in both( revaluation surplus/capital expenditure) Will lead to def tax Thanks v much

P2-D2Tutor7y ago#3

Hi, Deferred tax is the difference between the carrying value and the tax base. If the asset is revalued, the carrying value will increase but the tax base will not be adjusted as the gain on the asset will be taxed when it is sold in the future. If we incur capital expenditure then the accounting treatment and tax treatment are different giving rise to temporary differences and therefore we have deferred tax. Thanks

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