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Where did the deferred tax movement of 0.6 come from?
And the investment in eq ins value went up by 1m then became an associate,where does this 1m go?
The deferred tax movement, from memory, is explained in the answer.
The increase of 1m would have been reflected in the value of the investment between the date of acquisition and the date the investment was converted into a subsidiary. Am I not correct (I don’t have the question to hand) that the question says something like “the investment has been correctly treated by the parent company”?
Nope,the investment (FVTOCI)was a simple investment,its value went up by 1m then it became an associate,is there any need to add/deduct the increase in OCOE?
And the deferred tax explanation is not there for the 0.6
The 1m is the increase of the FV of the investment in Associate. The b/f amount was 8m and the FV at y/e was 9m.
The deferred tax calculation uses a tax rate of 30%. IAS 12 tells us if there is more expense there is less tax. Therefore since we added depreciation of 2m we must then deduct the tax on this 2m.
2m x 30% = 0.6 (which is deducted from deferred tax on consolidation)
Well that’s my understanding of it anyway
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