IAS 12

Hi,

Could you please help with solving the problem:

An entity acquired an intangible asset (license) for 100 that has useful life 5 years. The asset will be solely recovered through use. No deductions cab be claimed until license is expired. No deduction is available on disposal. Trading profits from using license are taxed at 30%.

At the end of year 1 the asset has carrying amount of 80. In earning that taxable profit of 80, the entity will pay tax of 24.

– At assets initial recognition no deferred tax asset is recognized. In the end of year 1 a DTA in the amount of 7.2

– At assets initial recognition no deferred tax liability is recognized. In the end of year 1 a DTA in the amount of 7.2

– At assets initial recognition no deferred tax asset is recognized.

– At assets initial recognition no deferred tax liability is recognized. Similarly, no deferred tax is recognized in the end of year 1.

Could you please explain how come that DTA is 7.2 if 100-80=20*30%=6. Amusing that first two options are not correct, the last two are also seem to me to be incorrect.

Thank you in advance!