MOBY

Sir, May I ask for clarification? It is Moby Qn 2 Dec 13 regarding the computation of deferred tax and income tax expense. Qn Given “Deferred Tax of $8,000 in (Cr) side of trail balance (as at 30 Sep 13). Adjustment required was “At 30 Sep 13, the tax base of Moby’s net assets was $24 million less than their carrying amount. This does not include the effect of revaluation of 4,400. The income tax rate of Moby is 25%.” Ans (Given in ACCA report) ____Dr_____ _______Cr______ Provision bf at 1 Oct 12 (8,000) Provision c/f required at 30 Sep 13 Taxable Difference: Given per Qn 24,000 On Revaluation 4,400 28,400 x 25% 7,100 ————— (900) Charged to other comprehensive income on revaluation gain (4,400×25%) (1,100) Credit to P&L 2,000 I do understand that the revaluation surplus of 4400 will create deferred liability at 25% tax rate so it is added to the required provision for deferred tax. I just can't comprehend why we added back the 1100 (4400 x 25%) to the decrease in deferred tax liability? On previous cases I encountered only the recognition of deferred tax from the revaluation gain but no adding back of same amount to the difference in deferred tax liability.