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IAS 12 deferred tax

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › IAS 12 deferred tax

  • This topic has 8 replies, 2 voices, and was last updated 1 year ago by mrjonbain.
Viewing 9 posts - 1 through 9 (of 9 total)
  • Author
    Posts
  • February 2, 2024 at 8:06 pm #699624
    Dansa
    Participant
    • Topics: 6
    • Replies: 12
    • ☆

    Hi all

    IAS 12 says that deferred tax arising from goodwill is prohibited

    What does that mean?

    I know that for fair valuation of subsidiary net assets, deferred tax might arise

    Thanks

    February 3, 2024 at 7:35 am #699651
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    It means ignore potential deferred tax implications arising from the existence of goodwill.

    February 3, 2024 at 7:37 am #699652
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    The following is a relevant quote on ACCA site-“Theoretically, goodwill gives rise to a temporary difference that would result in a deferred tax liability as it is an asset with a carrying amount within the group financial statements but will have a nil tax base. However, IAS 12 specifically excludes a deferred tax liability being recognised in respect of goodwill”.

    February 3, 2024 at 7:42 am #699654
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    Quote came from the following technical article-

    https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/strategic-business-reporting/technical-articles/deferred-tax.html#The-SBR-exam

    February 3, 2024 at 7:42 am #699655
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    Hope this helps.

    February 3, 2024 at 7:45 pm #699690
    Dansa
    Participant
    • Topics: 6
    • Replies: 12
    • ☆

    Ah thanks so much that helps lots

    Basically, we have deferred tax for the revaluation of assets and liabilities of a subsidiary to calcualte goodwill in business combinations but not for goodwill itself – right?

    February 4, 2024 at 4:54 am #699700
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    With other temporary differences you adjust for deferred tax but not on goodwill. So that is correct.

    February 4, 2024 at 10:21 pm #699752
    Dansa
    Participant
    • Topics: 6
    • Replies: 12
    • ☆

    Great

    Thanks

    February 4, 2024 at 11:04 pm #699753
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2426
    • ☆☆☆☆☆

    You are welcome.

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