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Hi Mike
I have been struggling abit on ias 12Consider the following situation
Abc co. has committed itself to close a division resulting in closure cost provision of $2m in its SFP. The tax authority allows tax deductions for closure cost only when the closure actually takes place.The question is what will be the carrying amount of the liability and tax base and will it result to deferred tax asset/liab and why?
It will be a deferred tax asset because the tax authorities will not allow the provision as a tax deduction until (probably) next year so the accounting profit will be increased this year because of the add-back in the tax computations
But you appear to be pursuing this fringe point to the nth degree in the P2 forum as well as in P7.
I cannot honestly remember when the P7 examiner last asked a question about IAS 12 that was worth more than 3 marks.
Surely there are other areas that are more deserving of this level of intensity!
OK?
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