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Dear professor, assume ROUA and lease liability value to $4m at inception. in that consider the following:
If the tax deduction received is in respect of the leased asset then: the right-of use asset has a tax base of $4 million.
I don’t understand this professor! why will tax base be of $4m?
should not it be zero?
Moreover i have doubt related to tax base of lease liability also- what will be its tax base if lease liability is not allowed for by the local tax jurisdiction?
If asset and liability are same figure – no DT
If they are different – DT
EG
Lease asset 100 Lease liability 120
We net off the two – net liability 20
Multiply by the tax rate x20% = 4
A net liability would give rise to a DT asset (just as a net liability would give rise to a DT liability)
I would avoid the word tax base as you will get confused. All they want to know is the DT asset or liability
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