- This topic has 9 replies, 2 voices, and was last updated 13 years ago by
.
- Posts
Hi Sir,
Sir can you please give me a simple exam howdo we calculate the deffered tax arising on the translation of foregin operation.
Best regards
I don’t ever remember seeing that in a question – where have you found that problem?
I’m sorry – maybe I’m blind or just stupid. However, I’m looking at BPP study text page 166 and nowhere do I see “deferred tax arising on the translation of a foreign operation”
Can you help? Maybe a paragraph start point, a line number? Anything that you could use to point me in the right direction?
Sir it says
Where a foreign operation taxable profit or tax loss is determined in foreign currency changes to the exchange rates give rise to temporary differences.These relate to the foreign entities own assets and liabilities rathe tha the reporting entitiy investment in the operation and so the reporting entity should recognise the resulting defferd tax liability or asset.
it is the first paragraph of pg 166 Section 6.4.I am not able to understand how does trnaslation give defferd tax .Hope now it is clear.
Thankyou
Ah – I’m with you now!!! I think you’ll find that Graham Holt will say”Ignore the deferred tax implications on the exchange differences arising from the translation of the subsidiary’s operations.
I don’t remember him ever asking you to account for it but, if he does, I think I’d multiply the aggregate difference by the current tax rate and compare that with the deferred tax balance brought forward. That would give me the movement on the deferred tax account for the year which in turn will be included within the tax charge for the yearI hope that that heps
Thank you Sir, I will just try to make sure i understand what you said.I am sorry but i am expecting a very tough paper this time i dont know why i feel that way so i want to make my self ready so that i can do most of the part of the paper atleast to achieve a passmark.
Now when we translate the Foreign subsidiary the total exxdiff are not shown in the income statement .we charge the total exxdiif with the tax rate increase the liability and instead of charging the income statement we charge the deffered tax beacuse as the deffered tax is related to an equity item we recognise the dr part of the transaction in the equity which will reduce the overall exdiif which is being shown in the OCI.Sir please correct me if am wrong.
Thankyou
- You must be logged in to reply to this topic.