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hello sir.. could you please explain to me this line with example?
IAS 12 prohibits the recognition of deferred tax liabilities to the extent that it is probable that the temporary differences will not be reversed in the foreseeable future. Why do we need to check whether the holding company determined subsidiary will distribute dividend or not?
2. How does it creates temporary difference at first place between holding company and subsidiary company?
If a sub has retained profits, extra tax may be payable in the parent’s country (if there is no Double Tax Treaty) when retained profits are remitted as dividend. So, it is a TD.
In reality, parent controls dividend policy, so, if they are not going to demand a dividend, there’s no need to set up DT liability.
I see, meaning parent co cannot recognise dtl on undistributed profits by subs?
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