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Extract from Vernon Co:
(iv) “During the year, Vernon Co revalued its head office for the first time, resulting in an
increase in value of $12m at 31 December 20X8. Deferred tax is applicable to this gain
Why is the deferred tax charge on the revaluation gain ($12m x 25% = $3m) not deducted within “tax expense” on the P&L. It has only been deducted under OCI.
This is because any tax on the increase in value matches up to where the increase in value has been posted, i.e. other comprehensive income.