deffered tax

This topic has 7 replies, 2 voices, and was last updated 7 years ago by MikeLittle.

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October 1, 2015 at 4:23 pm #274506
syed ali
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mike when the CV > tax base then deffered tax liability arises and reverse of this create deffered tax asset but i cannt understand concept behind this please explain this
October 2, 2015 at 7:41 am #274638
MikeLittle
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Carrying value is the amount still to be depreciated so that’s the value that will be used in accounting to reduce profits and arrive at taxable profits.

But tax base is the value of the asset that remains to be claimed against tax as allowable in e process of converting assets into expenses as the assets are used up.

And that figure is lower so whereas we are reducing accounting profits by the carrying value, for tax reasons that reduction is limited to the tax base.

Hence profits subject to tax will be greater than accounting profits

Does that do it for you?
October 2, 2015 at 9:28 am #274667
syed ali
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you means that if capital allowance is given in full in first year of asset useful life the taxman deduct it from first year profit to arrive at taxable profit but actually that relief or capital allowance relate to the future depreciation so deffered tax ensure that it should be reliefed against profit when actually depreciation occurs
so this means that actually relief is given in first year but we follow accrual concept by matching depreciation with tax relief by making deffered tax its liability because we should consume asset in next years is i am thinking right
October 2, 2015 at 9:30 pm #274751
MikeLittle
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Sounds good to me

By the way, what are you doing here as well as in F4? Have I asked you that before?
October 3, 2015 at 5:24 pm #274829
syed ali
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basically i belonged to very poor family and i now has got money and i think now to take f4 in this session thats why i am now starting f4
October 3, 2015 at 8:59 pm #274857
MikeLittle
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And P2 at the same time as F4?
October 4, 2015 at 11:56 am #274917
syed ali
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i had cleared 8 papers by self study i lift f4 as i think its boring to study f4 now after ammendments now i think i have to take it with p2
October 6, 2015 at 1:21 pm #275168
MikeLittle
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Ah, ok. Good luck …… but how can you possibly say that F4 Law is boring?
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