Deferred Tax (Consolidation)
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Deferred Tax (Consolidation)
Can anyone explain to me wt's going on with the deferred tax entries in Q. 1.21?
I have no idea how to account for those....
I have no idea how to account for those....
kipeggy- Posts : 15
Join date : 2008-12-05
Age : 38
Location : Lok Fu
Re: Deferred Tax (Consolidation)
Let me try to answer
CJ8A to CJ8C are related, they are dealing with the same thing.
CJ8A -
Since unrealised profit of FV adj arises, it leads to an increase of 2000 in the carrying value of the PPE, with the tax base of FV adj zero (since it was not tax depreciable in future), there will be a taxable TD and thus DTL.
To account for that, 1st we CR. DTL by 300 (2000x15%).
Then we Dr. NCI by their share, i.e. 40% of 300.
Finally we Dr. Goodwill for the Parent's share.
Why we Dr. NCI and GW can be interpreted as if we have a provision on the contingent liability (still remember the argument of $2?), we will book for this liability and share this with Parent and NCI.
The end result is a decrease in the FV of the net assets and resulting in a decrease NCI and an increase in GW.
CJ8B -
After 1 year, we bk for the additional depreciation arising from the FV adj. (250 as per CJ2)
This time, the additional depreciation incurred will leads to the decrease in taxable TD in 250 (i.e. CV = 2000 - 250 = 1750, TB = 0, TTD = 1750)
It resulted in a decrease in DTL of 250x15%.
So we Dr. DTL and Cr. P/L.
CJ8C -
It is the share b/w P and NCI the P/L resulted from CJ8B.
For CJ8D,
It arises due to elimination of unrealised profit 400 on the intra-gp sale.
When we reduce the amt of unreliased profit in inv 400,
we simutaneously Dr. Cos and Cr. Inv (as CJ5)
When we Cr. Inv, the CV of Inv reduced, with the TB as 0 (similar reason as above), since CV<TB, it is a DTD, and DTA arises.
DTA = 400 x 15% = 60
And we a/c for it as
Dr. DTA 60
Cr. P/L 60
We Cr. P/L is because the temporary difference has increased the current tax.
It seems I typed alot.... hope my interpretation helps u to understand la, and please correct me if im wrong
CJ8A to CJ8C are related, they are dealing with the same thing.
CJ8A -
Since unrealised profit of FV adj arises, it leads to an increase of 2000 in the carrying value of the PPE, with the tax base of FV adj zero (since it was not tax depreciable in future), there will be a taxable TD and thus DTL.
To account for that, 1st we CR. DTL by 300 (2000x15%).
Then we Dr. NCI by their share, i.e. 40% of 300.
Finally we Dr. Goodwill for the Parent's share.
Why we Dr. NCI and GW can be interpreted as if we have a provision on the contingent liability (still remember the argument of $2?), we will book for this liability and share this with Parent and NCI.
The end result is a decrease in the FV of the net assets and resulting in a decrease NCI and an increase in GW.
CJ8B -
After 1 year, we bk for the additional depreciation arising from the FV adj. (250 as per CJ2)
This time, the additional depreciation incurred will leads to the decrease in taxable TD in 250 (i.e. CV = 2000 - 250 = 1750, TB = 0, TTD = 1750)
It resulted in a decrease in DTL of 250x15%.
So we Dr. DTL and Cr. P/L.
CJ8C -
It is the share b/w P and NCI the P/L resulted from CJ8B.
For CJ8D,
It arises due to elimination of unrealised profit 400 on the intra-gp sale.
When we reduce the amt of unreliased profit in inv 400,
we simutaneously Dr. Cos and Cr. Inv (as CJ5)
When we Cr. Inv, the CV of Inv reduced, with the TB as 0 (similar reason as above), since CV<TB, it is a DTD, and DTA arises.
DTA = 400 x 15% = 60
And we a/c for it as
Dr. DTA 60
Cr. P/L 60
We Cr. P/L is because the temporary difference has increased the current tax.
It seems I typed alot.... hope my interpretation helps u to understand la, and please correct me if im wrong
Last edited by Lam Fai on Wed Dec 10, 2008 7:37 pm; edited 1 time in total
Lam Fai- Posts : 26
Join date : 2008-12-05
Age : 38
Location : Kwun Tong
Re: Deferred Tax (Consolidation)
CJ8A (see page 50 of Billy's notes):
In the CoFS, the carrying amount of the equipment is increased by $2m, while the tax base is still the original amt (FV-$2m). The difference creates a deferred tax liability.
Since the fair value adjustment would reduce the goodwill, the recognition of the DTL would be accounted for in the goodwill account, and a part of it is shared by the NCI.
CJ8B:
At the year end, due to the FV adj, there is an increase in dep exp, so a part of the DTL is reversed, $250 being the increase depreciation exp.
CJ8D:
Carrying amt of inventory decreased by $400 (unrealised profit)
Tax base of inventory remains unchanged
So, a deferred tax asset is recognised.
In the CoFS, the carrying amount of the equipment is increased by $2m, while the tax base is still the original amt (FV-$2m). The difference creates a deferred tax liability.
Since the fair value adjustment would reduce the goodwill, the recognition of the DTL would be accounted for in the goodwill account, and a part of it is shared by the NCI.
CJ8B:
At the year end, due to the FV adj, there is an increase in dep exp, so a part of the DTL is reversed, $250 being the increase depreciation exp.
CJ8D:
Carrying amt of inventory decreased by $400 (unrealised profit)
Tax base of inventory remains unchanged
So, a deferred tax asset is recognised.
Kay- Admin
- Posts : 34
Join date : 2008-12-05
Age : 39
Location : Shatin
Re: Deferred Tax (Consolidation)
高手果然係言簡意到...
Lam Fai- Posts : 26
Join date : 2008-12-05
Age : 38
Location : Kwun Tong
Re: Deferred Tax (Consolidation)
高手過招
我覺得個picture clear左好多, 多謝兩位高手拔刀相助!
我覺得個picture clear左好多, 多謝兩位高手拔刀相助!
kipeggy- Posts : 15
Join date : 2008-12-05
Age : 38
Location : Lok Fu
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