- This topic has 1 reply, 2 voices, and was last updated 11 years ago by
.
- Posts
A parent entity sold inventory to a subsidiary for $40 000. The cost of the inventory to the parent was $30 000. What is the tax base and carrying amount of the inventory to the group? The CPA text book says the tax base is $40 000 and carrying amount is $30 000. I don’t understand why is not the other way around. Please help.
Much appreciated!
SamThe only way I can think that deferred tax would come into play with this in the way you describe is if the tax jurisdiction taxes the parent company on the “profit” made on the sale of stock to the subsidiary. As the unrealised profit will be removed from the consolidated accounts there will be a tax difference which should reverse itself once the inventory is sold outside the group and the profit is realised.
- You must be logged in to reply to this topic.