IAS 12

This topic has 7 replies, 2 voices, and was last updated 8 years ago by MikeLittle.

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March 2, 2014 at 8:09 pm #161295
alighere
- Topics: 45
- Replies: 66
Why should you recognize a deferred tax on revaluation of NCA?

When will the Deferred tax liability be expected to be settled?

Why is it charged to equity?
March 3, 2014 at 1:27 pm #161338
MikeLittle
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- Topics: 26
- Replies: 22596
Because, on sale at the revalued amount, a profit will be achieved resulting in a tax charge.

Settled on sale of the asset

Because the revaluation is credited to equity
March 3, 2014 at 2:49 pm #161348
alighere
- Topics: 45
- Replies: 66
If land has been revalued to its fair value from 80,000 to 100,000 then:
CV=100,000 and its Tax Base (TB)= 80,000/=. Tax rate = 25 percent

Will capital allowances be allowed when the asset is sold. In other words, the 20,000*25%= is the ONLY tax that will be payable once the asset is sold? Is that the meaning?
March 3, 2014 at 6:52 pm #161385
MikeLittle
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No, capital allowances (are they available on land – I’m not sure – you’ll need to ask the F6 tutor about that!) will, if they apply to land, only be given on the original cost. I THINK!

This is way beyond F7 and I don’t remember anything like it at P2!

Sorry to be non-definitive about this
March 3, 2014 at 7:08 pm #161388
alighere
- Topics: 45
- Replies: 66
I ask that question because if land has been revalue to 100000 from 80000, if we assume the tax base was 80000 before and after revaluation, why do we recognize a deferred tax of the equivalent of 20000 as the future liability. The tax base will remain same right every year because you don’t depreciate land. Once the asset has been sold, we only pay tax equivalent to the 20000 right? Or do we pay tax on the 100000?
March 3, 2014 at 7:52 pm #161392
MikeLittle
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- Topics: 26
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If you make a gain on the land investment, you’ll pay tax on the amount of the gain
March 3, 2014 at 7:54 pm #161393
alighere
- Topics: 45
- Replies: 66
Really? You don’t pay tax on the entire amount?
March 3, 2014 at 7:59 pm #161398
MikeLittle
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- Topics: 26
- Replies: 22596
If you buy something and then sell it for the same price, why would you expect to pay tax?

If it has attracted capital allowances, you pay tax on the difference between sale proceeds and tax written-down value
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