F7 2013 December , Question 2

Hi Tutor,

For deferred tax working for part v, I got provision b/f at 1 Oct 2012 at -8000, and taxable differences of 7100 (24,000 plus revaluation gain of 4400 multiply by 25% tax) , and I got -900. What I don’t understand next is why do you still take the revaluation gain tax of 4400*25%=1100 and charged to other comprehensive income on revaluation gain. To me, it seems that we are taking taxing on revaluation gain and then later we took that out again. without the comprehensive income on revaluation gain, I get -900, and income tax expense should be $3.4m -$0.9m-$1.05m =$1.45m, after you took that $1.1m into consideration, the tax become much cheaper at only 0.35m, so whats the rationale of including the tax gain in the first place.

Second question is when do we take into consideration on revaluation tax surplus? whenever the question state deferred tax is applicable to the revaluation surplus? What if the revaluation turned out to be lesser than the carrying amount of the asset? is there a tax credit?