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Hello Tutor,
Could you kindly tell me in Lease the tax base is Nil. So how come it results in Deferred Tax Asset?
Thanks.
The carrying amount is Right of Use Asset minus Lease liability.
Lease liability is always bigger.
So the carrying amount is a net credit in SFP.
Therefore the DT will be a DEBIT or asset in the SFP.
(Alternatively, in the early years of the lease, P&L expense is always greater than rent expense allowed for tax, so conceptually we have not yet had enough tax relief in the past. The tax relief will be coming in the future.
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