Advanced Accounting and Financial Reporting

IAS 12 Deferred Tax

Ahmed Raza Mir, FCA

Deferred Tax by Sir Arm

Question 1

Accounting Profit 4,500,550 Deferred Tax

Account head Amount DTE / (DTI)
Add Depreciation 125,000 50,000

A
Accounting Depr 600,000 Gratuity (150,000) (60,000)
Disallowed penalty 45,000 Bad debts (34,400) (13,760)

FC
Gratuity Accrued 250,000 Capitalized interest 40,000 16,000
Bad debt Expense 75,000 (7,760)

Less Reconciliation
Tax Depr (725,000)
Gratuity paid (100,000) Tax on Accounting Profit 1,800,220

ir,
Exempt capital gains (75,600) Tax on Disallowed penalty 18,000
Dividend (low rate income) (124,250) Tax on exempt gains (30,240)
Debts written off (40,600) Tax on dividend (37,275)
Interest allowed but capitalized

Taxable income (Normal rate)

(40,000)

4,365,100
M 1,750,705
a
Current Tax 1,758,465
Current tax - Normal rate 1,746,040 Deferred Tax (7,760)
az

Current tax - Reduced rate 12,425 1,750,705

1,758,465
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 2

Accounting Profit 100,000 Deferred Tax

Account head Amount DTE / (DTI)
Add Warranty (6,000) (2,400)
Accounting Depr 15,000 Depreciation 5,000 2,000
Provision made for warranty 10,000 Prepaid Expenses 5,000 2,000
1,600

A
Less
Exempt capital gains (6,000)

FC
Tax Depr (20,000) Reconciliation
Warrantees settled (4,000)
Prepaid Expenses (5,000) Tax on Accounting Profit 40,000
90,000 Exempt income (2,400)
37,600

ir,
Current Tax payable 36,000
Current Tax income 36,000
Deferred Tax 1,600

M 37,600
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 3

Accounting profit 100,500 Deferred Tax

Add Account heads Amount DTE / (DTI)
Accounting depreciation 15,000 Depreciation 5,000 2,000
Penalty 1,500 Unpaid Expenses (3,000) (1,200)
Unpaid expenses 3,000 Advance from customer (2,000) (800)
Advance treated as income 2,000 Income not yet received 2,000 800
Bad Debt expense 1,500 Bad Debts 500 200

A
Amortization 5,000 Development Expenses 30,000 12,000
13,000

FC
Less Reconciliation
Tax depreciation (20,000)
Interest not yet received (2,000) Tax on Accounting Profit 40,200
Bad debts written off (2,000) Penalty 600
Development expense (35,000) 40,800

ir,
69,500 Current Tax Expense 27,800
Deferred Tax 13,000
Current tax 27,800 40,800

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 4

Accounting profits 4,500,000 Deferred Tax

Add:-
Accounting Depreciation 625,000 Account head Amount DTE / (DTI)
Tax gain on disposal 135,000 Depreciation 800,000 320,000
Advance income 125,000 Gain on disposal 315,000 126,000
Lease interest and depreciation 356,000 Advance from customer (125,000) (50,000)

A
Penalty paid 46,500 Capitalized Interest 400,000 160,000
Bad Debts Expense 12,575 Prepaid Expenses 220,000 88,000

FC
Inadmissible interest Expense 60,000 Lease differences 194,000 77,600
Bad Debts 9,925 3,970
Less:- 725,570
Tax Depreciation (1,425,000) Reconciliation
Accounting gain on disposal of PPE (450,000)

ir,
Capitalized Interest (400,000) Tax on Accounting Profit 1,800,000
Prepaid Expenses (220,000) Penalty 18,600
Lease rentals (550,000) Exempt Capital Gains (50,200)
Exempt Capital gains (125,500) Exempt Agriculture income (32,000)
Bad debts written off
Dividend Income
Agricultural Income
(22,500)
(125,450)
(80,000)
M
Dividend
Inadmissible expense
(37,635)
24,000
1,722,765
a
2,461,625
Current Tax Expense 997,195
az

Current Tax Expense - normal 984,650 Deferred Tax 725,570

Current Tax Expense - Reduced rate 12,545 1,722,765
997,195
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 5

Accounting Profit

Sales 177,633,594 Deferred Tax

COGS (122,106,875)
GP 55,526,719 Particulars Amount DTE / (DTI)
Dividend Income 512,500 Depreciation (883,784) (353,514)
Disposal Income 375,000 Lease 246,147 98,459
Depr - Owned (9,385,542) Bad Debts (653,750) (261,500)

A
Depr - Leased (1,815,212) Gain difference (200,000) (80,000)
Fin Chrgs - Lease (1,750,222) (596,555)

FC
Fin Chrgs - Others (487,278) Reconciliation
Bad Debts (853,750)
Donations (562,500) Tax on Accounting Profit 14,505,386
Other Expenses (5,296,250) Donations 225,000
Dividend (153,750)
Accounting Income 36,263,465 14,576,636

ir,
Taxable Income
Current Tax Expense 15,173,191
Accounting Income

Addback
36,263,465
M
Deferred Tax (596,555)
14,576,636
a
Depr lease 1,815,212
Fin Chrgs - Lease 1,750,222
az

Donations 562,500
Depr - Owned 9,385,542
Bad Debts Expense 853,750
Gain Difference 200,000
R

Less
Payment on leases (3,811,581)
ed

Depr Tax (8,501,758)

Written off B/Debts (200,000)
Dividend Income (512,500)
hm

Taxable Income 37,804,852

CTE - CY 15,121,941
Dividend 51,250
15,173,191
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 6

Accounting Income 40,000

Less:- Income not yet received (40,000)
Net Taxable income -

Current Tax -

Balance Sheet Approach

Carrying Amount of Income rece 40,000

A
Tax Base -
Taxable difference 40,000

FC
Reconciliation

Tax on Accounting Profit 16,000

Current tax -

ir,
Deferred Tax 16,000
16,000

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 7

Accounting Income Deferred Tax

Fee Income 40,000
Interest Income 50,000 Account head Amount DTE / (DTI)
Consultancy Income 45,000 Fee Income 40,000 16,000
Accounting Income 135,000 Interest Income 15,000 6,000
22,000

A
Accounting Income 135,000 Reconciliation
Less

FC
Fee not yet received (40,000) Tax on Accounting Profit 54,000
Interest not yet received (15,000)
Taxable Income 80,000 Current Tax Expense 32,000
Deferred Tax 22,000
Deferred tax Balance Sheet Approach 54,000

ir,
Particulars CA TB Diff
Fee receivables 40,000 - 40,000
Interest Receivable 15,000
Net Taxable differences
M
Deferred Tax Closing Balance
- 15,000
55,000
22,000
a
Deferred Tax Charge
Opening Deferred Tax -
az

Closing Deferred Tax (22,000)

Deferred Tax Charge (Expense) (22,000)
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 8

Accounting Income -
Add:
Advance form customer 45,000
Taxable Income 45,000

Deferred Tax Balance Sheet Approach

Particulars CA TB Diff

A
Advance from customer 45,000 - 45,000
Net deductible difference 45,000

FC
Deferred Tax Closing Balance 18,000

Deferred Tax Charge Reconciliation

Opening Deferred Tax - Tax on Accounting Profit -
Closing Deferred Tax (18,000)

ir,
Deferred Tax Charge (income) (18,000) Current Tax Expense 18,000
Deferred Tax (18,000)
-

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 9

Accounting Income 35,000

Add
Expenses not paid 15,000
Taxable Income 50,000

Current tax 20,000

Deferred Tax (Balance Sheet Approach)

A
Particulars CA TB Diff

FC
Expenses Payable 15,000 - 15,000
Net deductible difference 15,000
Deferred Tax Closing Balance 6,000

Deferred Tax Charge Reconciliation

Opening Deferred Tax - Tax on Accounting Profit 14,000

ir,
Closing Deferred Tax (6,000)
Deferred Tax Charge (income) (6,000) Current Tax Expense 20,000

M Deferred Tax (6,000)

14,000
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 10

Accounting profits 450,000 Deferred Tax

Add:- Account head Amount DTE / (DTI)
Accounting Depreciation 100,000 Depreciation (25,000) (10,000)
Accounting Amortization 70,000 Amortization (10,000) (4,000)
(14,000)
Less:-
Tax Depreciation (75,000) Reconciliation
Tax Amortization (60,000) Tax on Accounting Profit 180,000

A
485,000 180,000

FC
Current Tax Expense - normal 194,000 Current Tax Expense 194,000
Deferred Tax (14,000)
180,000

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 11

Deferred Tax
Accounting profits 600,000 Account head Amount DTE / (DTI)
Add:- Depreciation 45,000 18,000
Accounting Depreciation 200,000 Amortization 25,000 10,000
Accounting Amortization 60,000 28,000
Reconciliation
Less:-
Tax Depreciation (245,000) Tax on Accounting Profit 240,000

A
Tax Amortization (85,000) 240,000
530,000

FC
Current Tax Expense 212,000
Current Tax Expense - normal 212,000 Deferred Tax 28,000
240,000

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 12

Deferred Tax
Accounting Profit 10,000 Account head Amount DTE / (DTI)
Add Depreciation 6,500 2,600
Accounting Depreciation 7,200 Gains difference (2,700) (1,080)
Tax gain on disposal 2,100 1,520

Less Reconciliation
Tax Depreciation (13,700) Tax on Accounting Profit 4,000

A
Accounting gain on disposal 600 4,000
Taxable Income 6,200

FC
Current Tax Expense 2,480
Current tax Expense 2,480 Deferred Tax 1,520
4,000

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 13

Fee receivable 900,000

Fee income 900,000

Deferred Tax Exp 360,000

Deferred Tax Liability 360,000

Reconciliation
Tax on Accounting Profit 360,000

A
360,000

FC
Current Tax Expense -
Deferred Tax 360,000
360,000

Closing balance of Deferred Tax Liability 360,000

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 14

Tax rate changed to 48%. Opening balances of deferred

tax asset / liability is to be adjusted.

Opening deferred tax liability (at 40%) 360,000

To be increased 72,000
Adjusted opening balance 432,000

Assuming that there is no income generated during the year.

A
Reconciliation

FC
Tax on Accounting Profit -
Tax increase due to rate change 72,000
-
Current Tax Expense -
Deferred Tax 72,000
72,000

ir,
Closing balance of Deferred Tax Liability 432,000

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 15

Accounting Profit 6,000 Account head Amount DTE / (DTI)

Add Depreciation 3,000 1,050
Accounting Depreciation 1,000 Gains difference (2,100) (735)
Tax gain on disposal 1,400 Rate change effect (450)
Accounting loss on disposal 700 (135)
Less

A
Tax Depreciation (4,000) Reconciliation
5,100 Tax on Accounting Profit 2,100

FC
Tax reduced due to rate change (450)
1,650
Current tax Expense 1,785
Current Tax Expense 1,785
Deferred Tax (135)

ir,
1,650

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 16

Accounting Profit 1,250,550 Deferred Tax (P/L Approcah)

Accunt Tax TTD / (DTD)
Add Depriciation 200,000 250,000 50,000
Accounting Depr 200,000 Service Income 56,000 39,200 16,800
Serv Income received 39,200 Prepaid Rent - 40,000 40,000
Gratuity Expense 40,000 Gratuity 40,000 - (40,000)
Less Net Taxable / (Deductable) Differences 66,800
Tax Depr (250,000) Deferred Tax Expense (Charge) 26,720

A
Service Income (56,000)
Prepaid Rent (40,000) Balance Sheet Approach

FC
Since this is company's first year of operation so no
Taxable Income 1,183,750 opening balances available and no opening deferred tax is
calcualted
Current Tax 473,500
CA TB TTD / (DTD)
Reconciliation of Tax Expense Prop, Plant Equp 800,000 750,000 50,000

ir,
Tax on Accounting Profit 500,220 Income Rece 16,800 - 16,800
Prepaid Rent 40,000 - 40,000
Current Tax Expense 473,500 Prov for Grtuity (40,000) - (40,000)
Deferred Tax Expense
Income Tax Expense
26,720 TTD as at
500,220
M
Deferred Tax Liabi (Closing Balance)
66,800

26,720
a
Deferred Tax Liabi (Opening Balance) -
Deferred Tax Expense (Charge) 26,720
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 17

Accounting Profit 1,250,550 Deferred Tax (P/L Approcah)

Account Tax TTD / (DTD)
Add Depreciation 120,000 150,000 30,000
Accounting Depr 120,000 Bad Debts Expense 40,000 24,000 (16,000)
Bad Debts Expense 40,000 Unearned Incm - (40,000) (40,000)
Unearned Income 40,000 Gratuity 90,000 - (90,000)
Gratuity Expense 90,000 Interest Recev 75,000 - 75,000
Less

A
Tax Depr (150,000) Net Taxable / (Deductable) Differences (41,000)
Debts Written off (24,000) Deferred Tax Expense (Charge) (16,400)

FC
Interest Income Receivable (75,000)
Taxable Income 1,291,550 Balance Sheet Approach
Since this is company's first year of operation so no
Current Tax 516,620 opening balances available and no opening deferred tax is
calcualted
Reconciliation of Tax Expense CA TB TTD / (DTD)

ir,
Tax on Accounting Profit 500,220 Prop, Plant Equp 480,000 450,000 30,000
Current Tax Expense 516,620 Provision For BD (16,000) - (16,000)
Deferred Tax Expense
Income Tax Expense
(16,400)
500,220
M
Unearned Incm
Prov for Grtuity
Interest Recevable
TTD as at
(40,000)
(90,000)
75,000
-
-
-
(40,000)
(90,000)
75,000
(41,000)
a
Deferred Tax Liabi (Closing Balance) (16,400)
az

Deferred Tax Liabi (Opening Balance) -

Deferred Tax Expense (Charge) (16,400)
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 18

Accounting Profit 2,800,000 Prop Plant Eqip CA TB

Opening Bal 900,000 800,000
Add 100,000 Depriciation (100,000) (160,000)
Accounting Depr 120,000 800,000 640,000
Income Received 57,000
Gratuity Expense 100,000 Unearned Income CA
Fee Received Opening Bal 40,000

A
Less Received 120,000
Tax Depr (160,000) Revenue (150,000)

FC
Income earned (150,000) Closing Bal 10,000
Gratuity Paid (40,500) Gratuity Payable
Fee Income (132,500) Opening Bal 70,000
Taxable Income 2,694,000 Payment (40,500)
Expense 57,000

ir,
Current Tax 1,077,600 86,500
Fee Receivable
Tax Reconciliation Opening Bal 87,500
Tax on Acc Profit
Current Tax Expense
D Tax Expense
Deferred Tax
1,120,000
1,077,600
42,400
1,120,000
Income

M
Received
132,500
(100,000)
120,000
a
Opening Closing
az

CA TB Differ CA TB Differ
Prop Plant Equp 900,000 800,000 100,000 800,000 640,000 160,000
Unearned Inc (40,000) - (40,000) (10,000) - (10,000)
R

Gratuity Pay (70,000) - (70,000) (86,500) - (86,500)

Fee Rece 87,500 - 87,500 120,000 - 120,000
Net Differences 77,500 183,500
ed

Deferred Tax 31,000 73,400

Deferred Tax Liability Opening (31,000)

hm

Deferred Tax Liability Closing 73,400

Deferred Tax Charge (Expense) 42,400
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 19

Accounting Profit 2,000,000 Prop Plant Eqip CA TB

Opening Bal 1,181,250 1,115,625
Add Depriciation (118,125) (196,875)
Accounting Depr 118,125 1,063,125 918,750
Wtree Expense 74,680
Prepaid Exp(Expired) 30,180 Prov for Wrtee CA
Gratuity Expense 75,000 Opening Bal 35,520
Fee Received 205,000 Cash Paid (40,000)

A
Advance Received 140,000 Revenue 74,680
Less Closing Bal 70,200

FC
Tax Depr (196,875)
Wrtree Paid (40,000) Prepaid Expenses
Gratuity Paid (25,000) Opening Bal 75,450
Fee Income (225,000) Payment -
Income from advance (48,780) Expense (30,180)
Taxable Income 2,107,330 45,270

ir,
Current Tax 842,932 Provision for Grtee Rent Receivable
Open Bal 70,000 Open Bal 100,000
Tax Receonciliation
Tax on Acc Profit 800,000
Expense
Paid
M 75,000
(25,000)
120,000
Income
Cash Rec
Closing
225,000
(205,000)
120,000
a
CTE 842,932
DTE (42,932) Unearend Income
az

800,000 Opening Balance 48,780

Cash Received 140,000
Income (48,780)
140,000
R

Deferred Tax
Opening Closing
ed

CA TB Differ CA TB Differ
Prop Plant Equp 1,181,250 1,115,625 65,625 1,063,125 918,750 144,375
Prov for Wrtee (35,520) - (35,520) (70,200) - (70,200)
Prepaid Expenses 75,450 - 75,450 45,270 - 45,270
hm

Provision for Grtee (70,000) - (70,000) (120,000) - (120,000)

Rent Receivable 100,000 - 100,000 120,000 - 120,000
Unearend Income (48,780) - (48,780) (140,000) - (140,000)
Net Differences 86,775 (20,555)
A

Deferred Tax 34,710 (8,222)

Deferred Tax Liability Opening 34,710

Deferred Tax Liability Closing (8,222)
Deferred Tax Charge (Expense) (42,932)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 20
Profit and Loss method
2010 2011 2012 2013

Accounting Exp - Depr 300,000 300,000 300,000 300,000

Tax Expense - Interest (200,000) - - -

Tax Expense - Depreciation (250,000) (250,000) (250,000) (250,000)
(450,000) (250,000) (250,000) (250,000)

A
Taxable Deductible Deductible Deductible
Difference (for the period) 150,000 (50,000) (50,000) (50,000)

FC
Deferred Tax Exp 60,000 (20,000) (20,000) (20,000)
Deferred Tax Liability 60,000 40,000 20,000 -

Balance Sheet Approach

2010 2011 2012 2013

ir,
CA of PPE 900,000 600,000 300,000 -
TB of PPE 750,000 500,000 250,000 -
As at Difference (Taxable) 150,000 100,000 50,000 -

Def Tax Liability Balance

Deferred Tax Change
60,000
60,000
M 40,000
(20,000)
20,000
(20,000)
-
(20,000)
a
Exp Income Income Income
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 21

Assuming Installation and professional fee is allowed in the year of occurrence.

Profit and Loss method

2010 2011 2012 2013 2014 2015

Accounting Exp - Depr - 280,000 280,000 280,000 280,000 280,000

T.E - Interest (300,000)

A
T.E - Installation Fee (120,000)
T.E - Professional Fee (110,000)

FC
T.E - Dépréciation - (174,000) (174,000) (174,000) (174,000) (174,000)
(530,000) (174,000) (174,000) (174,000) (174,000) (174,000)

Taxable Deductable Deductable Deductable Deductable Deductable

Difference (for the period) 530,000 (106,000) (106,000) (106,000) (106,000) (106,000)

ir,
Deferred Tax Exp 212,000 (42,400) (42,400) (42,400) (42,400) (42,400)
Deferred Tax Liability 212,000 169,600 127,200 84,800 42,400 -

Balance Sheet Approach

CA of PPE
2010
1,400,000
870,000
2011
1,120,000
696,000
M
2012
840,000
522,000
2013
560,000
348,000
2014
280,000
174,000
2015
-
-
a
TB of PPE
As at Difference(Taxable) 530,000 424,000 318,000 212,000 106,000 -
az

Def Tax Liability Balance 212,000 169,600 127,200 84,800 42,400 -

Deferred Tax Change 212,000 (42,400) (42,400) (42,400) (42,400) (42,400)
Exp Income Income Income Income Income
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 22

Deferred Tax implication on lessee

Rental 142,950

Yr. Op Intr Prin Closing

1 400,000 64,000 78,950 321,050
2 321,050 51,368 91,582 229,468
3 229,468 36,715 106,235 123,233

A
4 123,233 19,717 123,233 (0)

FC
Profit and Loss method
Yr. 1 Yr. 2 Yr. 3 Yr. 4
Accounting Exp - Depr 100,000 100,000 100,000 100,000
Interest Expense 64,000 51,368 36,715 19,717
164,000 151,368 136,715 119,717

ir,
Tax Expense - Rentals (142,950) (142,950) (142,950) (142,950)
(142,950) (142,950) (142,950) (142,950)

Difference (for the period)

Deductible
(21,050)
Deductible
M
(8,418)
Taxable
6,235
Taxable
23,233
a
Deferred Tax Income (8,420) (3,367) 2,494 9,293
Deferred Tax Asset (8,420) (11,787) (9,293) 0
az

Balance Sheet Approach

R

Yr. 1 Yr. 2 Yr. 3 Yr. 4

CA of PPE 300,000 200,000 100,000 -
CA of Liability (321,050) (229,468) (123,233) -
ed

Net liability CA (21,050) (29,468) (23,233) -

TB of net Liability - - - -
hm

As at Difference (Taxable) (21,050) (29,468) (23,233) -

Def Tax Asset Balance (8,420) (11,787) (9,293) -

Deferred Tax Change (8,420) (3,367) 2,494 9,293
Income Exp Exp Exp
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Profit and Loss method

Yr. 1 Yr. 2 Yr. 3 Yr. 4

Interest Income 64,000 51,368 36,715 19,717

Tax Income - Rentals (142,950) (142,950) (142,950) (142,950)

Depreciation on PPE 100,000 100,000 100,000 100,000
(42,950) (42,950) (42,950) (42,950)

A
Taxable Taxable Deductible Deductible
Difference (for the period) 21,050 8,418 (6,235) (23,233)

FC
Deferred Tax Expense 8,420 3,367 (2,494) (9,293)
Deferred Tax Liability 8,420 11,787 9,293 (0)

Balance Sheet Approach

Yr. 1 Yr. 2 Yr. 3 Yr. 4

ir,
CA of GIFL 428,850 285,900 142,950 -
Unearned Finance Income (107,800) (56,432) (19,717) -
Net Investment in Lease 321,050 229,468 123,233 -

TB of Asset invested in lease

As at Difference (Taxable)
300,000

21,050
M 200,000

29,468
100,000

23,233
-

-
a
Def Tax Liability Balance 8,420 11,787 9,293 -
az

Deferred Tax Change 8,420 3,367 (2,494) (9,293)

Exp Income Income Income
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 23

Average Rental 163,000

Yr. 1 Yr. 2 Yr. 3 Yr. 4

Accounting Expense 163,000 163,000 163,000 163,000
Tax Expense - Rental (120,000) (145,000) (170,000) (217,000)
Difference 43,000 18,000 (7,000) (54,000)

Deferred Tax Income 17,200 7,200 (2,800) (21,600)

A
Deferred Tax Asset 17,200 24,400 21,600 -

FC
Balance Sheet

Rent payable CA 43,000 61,000 54,000 -

Tax Base - - - -
Difference 43,000 61,000 54,000 -

ir,
Deferred Tax Asset 17,200 24,400 21,600 -
Deferred Tax Change 17,200 7,200 (2,800) (21,600)
Income Income Exp Exp

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 24

Accounting profit 1,250,550 Deferred Tax

Add Account head Amount DTE / (DTI)
Accounting Depreciation 200,000 Depreciation 50,000 20,000
Accrued gratuity 40,000 Income receivable 39,200 15,680
Disallowed penalty 21,250 Prepaid 48,000 19,200
Gratuity (40,000) (16,000)
Less 38,880
Tax Depreciation (250,000) Reconciliation

A
Income still receivable (39,200) Tax on Accounting Profit 500,220
Prepaid Rent (48,000) Exempt capital gains (19,000)

FC
Exempt Capital gains (47,500) Disallowed Expenses 8,500
489,720
Taxable Income 1,127,100
Current Tax Expense 450,840
Current Tax 450,840 Deferred Tax 38,880

ir,
489,720

Deferred Tax (Balance Sheet Approach)

Particulars
PPE
CA
800,000
TB
M 750,000
Difference
50,000
a
Income Receivable 39,200 - 39,200
Gratuity Payable (40,000) - (40,000)
az

Prepaid rent 48,000 - 48,000

Net Taxable differences 97,200

Deferred Tax liability closing balance 38,880

R

Deferred tax Charge

Opening Deferred tax liability -
ed

Deferred Tax liability closing balance (38,880)

(38,880)
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 25

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 26

Deferred Tax
Account head Amount DTE / (DTI)
Accounting Income 5,000 Depreciation 35,000 14,000
Add Gratuity (17,000) (6,800)
Accounting Depreciation 45,000 Income receivable 40,000 16,000
Gratuity provision 17,000 Tax loss originated (53,000) (21,200)
2,000
Less

A
Tax Depreciation (80,000) Reconciliation
Fee income receivable (40,000) Tax on Accounting Profit 2,000

FC
Tax Loss (53,000)
Current Tax Expense -
Current Tax - Deferred Tax 2,000
2,000
Deferred Tax (Balance Sheet Approach)

ir,
Assuming it’s the year of incorporation of the company.

Particulars CA TB Difference
PPE
Fee receivable
Gratuity Payable
555,000
40,000
(17,000)
M 520,000
-
-
35,000
40,000
(17,000)
a
Loss CF (53,000) - (53,000)
Net Taxable differences 5,000
az

Deferred Tax liability closing balance 2,000

Deferred tax Charge

R

Opening Deferred tax liability -

Deferred Tax liability closing balance (2,000)
(2,000)
ed

Next year Deferred Tax

Account head Amount DTE / (DTI)
hm

Accounting Income 700,000 Depreciation 19,000 7,600

Add Gratuity (12,000) (4,800)
Accounting Depreciation 45,000 Income receivable 20,000 8,000
Fee received 80,000 Tax loss utilized 53,000 21,200
Gratuity provision increased 20,000 32,000
A

Less Reconciliation
Tax Depreciation (64,000) Tax on Accounting Profit 280,000
Fee income accrued (100,000)
Gratuity paid (8,000) Current Tax Expense 248,000
Taxable Income 673,000 Deferred Tax 32,000
Loss adjusted (53,000) 280,000
Net Taxable Income 620,000

Current Tax 248,000

 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Deferred Tax (Balance Sheet Approach)

Assuming it’s the year of incorporation of the company.

Particulars CA TB Difference
PPE 510,000 456,000 54,000
Fee receivable 60,000 - 60,000
Gratuity Payable (29,000) - (29,000)
Net Taxable differences 85,000

Deferred Tax liability closing balance 34,000

A
Deferred tax Charge

FC
Opening Deferred tax liability 2,000
Deferred Tax liability closing balance (34,000)
(32,000)

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 27

2010 2009
Accounting profit 23.50 (1.75)
Add back
Accounting Depr 15.00 15.00
Disallowed Exp 2.00
Provision for Grty 2.20 1.70
Less
Tax Depreciation (6.00) (45.00)

A
Allowed Exp (2.00) -
Exempt Income (1.25) (1.00)

FC
Taxable Income 31.45 (29.05)
Tax Losses used as Exp (29.05) -
Net Taxable Income 2.40 -
Current Tax 0.84 -

Differed Tax

ir,
2009 2010
Acc Exp Tax Exp (TTD)/ DTD Acc Exp Tax Exp (TTD)/ DTD
Depreciation
Gratuity
Other Expenses
Tax Losses
15.00
1.70
2.00
45.00
-
- M (30.00)
1.70
2.00
29.05
15.00
2.20
-
-
6.00
-
2.00
-
9.00
2.20
(2.00)
(29.05)
a
Net DTD 2.75 (19.85)
DTIncome 0.96 (6.95)
az

DTA 0.96 (5.99)

Balance Sheet Approach

R

CA TB (TTD)/DTD CA TB (TTD)/DTD
Plant (15.00) (45.00) (30.00) (30.00) (51.00) (21.00)
Gratuity 1.70 - 1.70 3.90 - 3.90
ed

Accrued Exp 2.00 - 2.00 - - -

Losses 29.05 -
Differences 2.75 (17.10)
DTA 0.96 (5.99)
hm

DT Income 0.96 (6.95)

Income tax Reconciliation

Tax on Accounting profit 8.23 (0.61)
CTE 0.84 -
A

DTE / (DTI) 6.95 (0.96)

7.79 (0.96)
Tax on exempt 0.44 0.35
8.23 (0.61)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 28

Accounting Income Reconciliation

Tax on Accounting Profit 0.07
Sales 108.00 Tax on Interest Expense 0.44
Expenditures (79.00) Research 2.63
Depreciation (5.25) 3.13
Depreciation (3.30)
Research (15.00) Current Tax -
Development Cost (4.00) Deferred Tax (3.13)

A
Interest Expense (1.25) (3.13)
Accounting Profit 0.20

FC
Taxable Profit Deferred Taxation

Accounting Profit 0.20 Account Head Acc Tax Diff

Depreciation 8.55 17.10 (8.55)

ir,
Accounting Depr 8.55 Amortization 4.00 6.00 (2.00)
Amortization of Inteng 4.00 Tax Los 1.60
Interest Expense 1.25 Net Taxable Differences (8.95)
Inadmissible research cost

Tax Depri
Half develp exp
15.00

(17.10)
(6.00)
Deferred Tax Liability
M (3.13)
a
Half research Cost (7.50)
az

Tax Loss (1.60)

Current Tax -
R

Balance Sheet Approach

ed

Account Head CA TB Diff

Building 29.75 24.50 (5.25)
Other FA 18.70 15.40 (3.30)
Intangibles 2.00 - (2.00)
hm

Tax Loss 1.60

(8.95)

Deferred Tax Liability (3.13)

A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 29

Question 29
2007 2006 Reconciliation 2007 2006
Accounting Profit 40.00 30.00 Tax on Accounting Profit 14.00 10.50
Tax on Capital Gains (3.50) (2.80)
Accounting Depreciation 10.50 7.70
on Machinery 25.00 25.00
on Furniture 5.00 5.00 Current Tax 4.27 -
Deferred Tax Income 6.23 7.70

A
Capital Gains (10.00) (8.00) 10.50 7.70
Tax Depreciation

FC
on Machinery (8.10) (9.00) Deferred Taxation
on Furniture (3.65) (4.05)
Taxable Income 48.26 38.95 Account Head Acc Tax Diff
Losses B/F (36.05) (75.00) Depreciation 30.00 11.75 18.26
12.21 (36.05) Loss (36.05)

ir,
Current Tax 4.27 - Deferred Tax (6.23)

Account Head Acc Tax Diff

Balance Sheet Approach

Loss M
Depreciation 30.00 13.05 16.95
(38.95)
(7.70)
a
Year Account Head CA TB Diff
az

2005 Machinery 175.00 90.00 (85.00)

Losses 75.00
Other FA 40.00 40.50 0.50
R

(9.50)

Deferred Tax Liability (2.85) (3.33)

ed

2006 Machinery 150.00 81.00 (69.00)

Losses 36.05
Other FA 35.00 36.45 1.45
hm

(31.50)

Deferred Tax Liability (11.03)

2006 Machinery 125.00 72.90 (52.10)

A

Other FA 30.00 32.81 2.81

(49.30)

Deferred Tax Liability (17.25)

 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Deferred Tax Liability Reconciliation 2007 2006

Tax on Accounting Profit 14.00 10.50
2005 Charge (2.85) Tax on Capital Gains (3.50) (2.80)
Rate Adjust 0.48
2006 Charge 10.50 8.18
Rate Adjustment (0.48)
Charge (7.70) Current Tax 4.27 -
(8.18) Deferred Tax Income 6.23 8.18
10.50 8.18
2007 Charge 6.23

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 30

Current Tax 2011 2010 DT 2011 2010

Profit before tax (Accounting) 60.00 45.00 Depr 0.700 0.700
Add back Gain 0.175
Accounting Depr 10.00 9.00 Bad Debts 0.70 1.05
Gain on disposal 1.00 Losses - (6.74)
Bad Debts 5.00 7.00 1.58 (4.99)

Less Reconciliation 2011 2010

A
Tax Depreciation (8.00) (7.00) A/C tax 21.00 15.75
Gain on disposal (0.50) - Exempt income (2.10) -

FC
Exempt Income (6.00) - 18.90 15.75
Bad Debts written off (3.00) (4.00)
Taxable Income 58.50 50.00 CT 20.48 10.76
Losses - (19.25) DT (1.58) 4.99
Net Taxable Income 58.50 30.75 Total 18.90 15.75

ir,
20.48 10.76

Balance Sheet Approach

Asset Liability

PPE
Op Acc

95.00
Op Tax
M 90.00
Cl Acc

84.50
Cl Tax

90.00
a
Oblig UFL (1.70) - (1.20) -
Asst UFL 2.50 - 1.80 -
az

Assets 12.50 10.20 16.70 13.85

CWIP - - 2.30 -
Loss - 3.50 - -
R

108.30 103.70 104.10 103.85

Taxable 4.60 0.25
DTA 1.61 0.09
(1.52)
ed

Balance sheet Approach

Machines 2009 2010 2011

hm

CA 104.00 95.00 82.50

Tax Base 97.00 90.00 80.00
Taxable 7.00 5.00 2.50
Provisions
CA (9.00) (12.00) (14.00)
A

Tax Base - - -
Deductible (9.00) (12.00) (14.00)

Losses (19.25) - -

Net (21.25) (7.00) (11.50)

Cl Bal DTA (7.44) (2.45) (4.03)
Charge (7.44) 4.99 (1.58)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 31

Tax already provided

2005 6,000,000 55% 3,300,000

2006 8,000,000 50% 4,000,000
2007 7,000,000 45% 3,150,000
2008 9,000,000 42% 3,780,000
14,230,000

A
2005
Reported Income 6,000,000

FC
Stock 10,000,000
Sample (14,000,000)
2,000,000 1,100,000

2006

ir,
Reported Income 8,000,000
Stock (10,000,000)
Sample 14,000,000

2007
Reported Income
M12,000,000

7,000,000
6,000,000
a
Less Assets (25,000,000)
Amort 5,000,000
az

Allowed Exp (3,600,000)

(16,600,000) -
R

2008
Reported Income 9,000,000
Amort 5,000,000
ed

Loss (16,600,000)
(2,600,000) -
7,100,000
Already provided (14,230,000)
hm

Excess Provided (7,130,000)

2009
Reported Income 12,000,000
Amort 5,000,000
A

Loss (2,600,000)
14,400,000 5,760,000
Net (1,370,000)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 32

DTA 280
Tax rate 40% 245
Grossed Up 700 560
New 900 315
DTA 315 280
280
DTA account
Opening 280

A
Rate adj -35
New 315

FC
Closing 560

Charge (280)

Current Tax
Profit 1,000

ir,
Payable reversed 900
Taxable Income 1,900

Current Tax

Tax on Accounting profit

M 665

350
a
Rate change 35
385
az

Current Tax 665

DT Income (280)
385
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 33
Accounting profit 4,600,000
Addback
A/c depreciation 28,700
Interest on Dism liab 625
A/c depreciation - Allowable 8,333 (80% of cost)
A/c depreciation - nonallowable 1,042
Warranty Exp - net 273,450
Losses booked IAS 37 10,000
Less

A
Installation cost (24,500)
Tax Depreciation (18,750)

FC
Tax Depreciation (10,417)
Warranty paid (296,950)
Losses realsed (IAS37) (6,450) (34,917)
Taxable Income 4,565,083
Current tax 1,826,033

ir,
Deferred Tax Difference DTI / (DTE)
First Asset (13,925) (5,570)
2nd Asset
Warranty
Losses under IAS 37
Net Deferred Tax Expense
M (2,083)
(23,500)
3,550
(833)
(9,400)
1,420
(14,383)
a
Tax on A/C profit 1,840,000
az

Perm diff 417

1,840,417
CTE 1,826,033
R

DTE 14,383 1,840,417

Balance Sheet Approach

ed

CA TB Diffe
Asset 1 258,300 231,250 (27,050)
Prov for disment (13,125) - 13,125
Asset 2 - taxable 91,667 89,583 (2,083)
hm

Asset 2 - Disallowed 23,750 - -

Provision for Wrtee (101,500) - 101,500
Provision for Restru (3,550) - 3,550
Net differences 89,042
A

Deferred Tax Asset - Closing balance 35,617

Deferred Tax Asset - opening balance (50,000)
Reversal of DTA (Defr tax Expense) (14,383)
Provision for wrtee
Opening balance 125,000
Provision incre 400,000
Provision revers (126,550)
Wrtee paid (296,950)
101,500
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 34

Working Notes for Deferred Tax

CA TB Diff
Cash 125,000 125,000 -
Account Receivable 650,000 690,000 40,000
Plant Property Equipment 3,200,000 3,000,000 (200,000)
Loan Receivable 200,000 212,500 12,500
Development Expenditures 600,000 - (600,000)

A
Interest Receivable 450,000 - (450,000)
Stock 300,000 300,000 -

FC
5,525,000 4,327,500 (1,197,500)

Share Capital 1,000,000 1,000,000 -

Retained Earnings 2,300,000 2,300,000 -
Other reserves 100,000 100,000 -
Accrued Liabilities 450,000 - 450,000

ir,
Creditors 578,500 578,500 -
Provisions 704,000 - 704,000
Long term Loans 392,500 392,500 -

Off balance Sheet

M 5,525,000

-
4,371,000

450,000
1,154,000

450,000
a
Net Differences 406,500
az

Charge 162,600

Revised Balance Sheet

R

Cash 125,000
Account Receivable 650,000
ed

Plant Property Equipment 3,200,000

Loan Receivable 200,000
Development Expenditures 600,000
Deferred Tax Asset 162,600
hm

Interest Receivable 450,000

Stock 300,000
5,687,600
A

Share Capital 1,000,000

Retained Earnings 2,462,600
Other reserves 100,000
Accrued Liabilities 450,000
Creditors 578,500
Provisions 704,000
Long term Loans 392,500
5,687,600
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

P/L for the next year

Sales 8,000,000
Cost of goods Sold (4,200,000)
Gross Profit 3,800,000
Dividend Income 100,000
Interest Income 300,000
Amortization (150,000)
Gratuity Expense (350,000)
Bad debts (50,000)

A
Depreciation (400,000)
Other Operating Expenses (1,750,000)

FC
PBT 1,500,000
Tax

Account Receivable Provision for BD

Opening 690,000 Opening 40,000

ir,
Sales 8,000,000 Increase 24,400
Write off (25,600)
cash (7,550,000) Closing 64,400

PPE (Accounting)
Opening
1,114,400
M
PPE (Tax)
3,200,000 Opening 3,000,000
a
Additions 1,000,000 Additions 1,000,000
Depreciation (400,000) Depreciation (650,000)
az

3,800,000 3,350,000
Development Expenditures Research (Tax)
Opening 600,000 Opening 450,000
R

Amortization (150,000) Amortization (50,000)

450,000 400,000
Interest Receivable Stock
ed

Opening 450,000 Opening 300,000

Income 300,000 Change -
Cash Received (600,000) 300,000
150,000
hm

Retained Earnings Accrued Liabilities

Opening 2,462,600 Opening 450,000
P/L - P/L 1,750,000
Dividend - Cash (1,580,000)
2,462,600 620,000
A

Creditors Provision
Opening 578,500 Opening 704,000
P/L 4,200,000 P/L 350,000
Cash Paid (4,000,000) Cash paid (650,000)
778,500 404,000
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Cash Account
Opening 125,000
Sales 7,550,000
Additions (1,000,000)
Interest 600,000
Accrued Liabilities (1,580,000)
Creditors (4,000,000)
Provision (650,000)
1,045,000

A
Current and Deferred Tax Deferred Tax Working
Account Tax Diff

FC
Accounting Profit 1,500,000 Bad Debts 50,000 25,600 24,400
Add Interest 300,000 600,000 300,000
Bad Debts 50,000 Amortization 150,000 - 150,000
Interest Received 600,000 Amortization - 50,000 (50,000)
Amortization 150,000 Gratuity 350,000 650,000 (300,000)

ir,
Gratuity 350,000 Depreciation 400,000 650,000 (250,000)
Acc Deprici 400,000 Operating Expenses 1,750,000 1,580,000 170,000
OE Accrued 1,750,000 44,400

DTI
M
DT on Dividend
17,760
(10,000)
7,760
a
Less
Bad Debts W/O (25,600) TOAP 600,000
az

Dividend Income (100,000) Dividend (30,000)

Interest Income (300,000) 570,000
Amortization (50,000)
R

Gratuity paid (650,000) CTE 577,760

Tax Depreciation (650,000) DTE (7,760)
OE paid (1,580,000) 570,000
1,444,400
ed

CTE 577,760
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Balance Sheet for year 2

Cash 1,045,000
Account Receivable 1,050,000
Plant Property Equipment 3,800,000
Loan Receivable 200,000
Dividend Receivable 100,000
Development Expenditures 450,000
Deferred Tax Asset 170,360
Interest Receivable 150,000
Stock 300,000

A
7,265,360
Share Capital 1,000,000

FC
Retained Earnings 3,392,600
Other reserves 100,000
CT payable 577,760
Accrued Liabilities 620,000
Creditors 778,500
Provisions 404,000

ir,
Long term Loans 392,500
7,265,360

Working Deferred Tax (Balance Sheet Approach)

Cash
M CA
1,045,000
TB
1,045,000
Diff
-
a
Account Receivable 1,050,000 1,050,000 -
Provision 64,400 - 64,400
az

Plant Property Equipment 3,800,000 3,350,000 (450,000)

Loan Receivable 200,000 212,500 12,500
Dividend Receivable 100,000 - -
Development Expenditures 450,000 - (450,000)
R

Deferred Tax Asset 170,360 170,360 -

Interest Receivable 150,000 - (150,000)
Stock 300,000 300,000 -
ed

7,329,760 6,127,860 (973,100)

Share Capital 1,000,000 1,000,000 -
Retained Earnings 3,392,600 3,392,600 -
Other reserves 100,000 100,000 -
hm

CT payable 577,760 577,760 -

Accrued Liabilities 620,000 - 620,000
Creditors 778,500 778,500 -
Provisions 404,000 - 404,000
Long term Loans 392,500 392,500 -
A

7,265,360 6,241,360 1,024,000

Off balance Sheet - 400,000 400,000
Net Differences 450,900
Charge 180,360
On Dividend (10,000)
170,360
Opening 162,600
Net On Dividend (7,760)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 35
Sales 177,633,594 PPE (Carrying Amount)
Cost of sales (133,307,629) Opening 112,723,042
Gross Profit 44,325,965 Depreciation (9,385,542)
Donations (562,500) Disposal (650,000)
Financial Charges (2,237,500) Acquisition 7,500,000
Other Expense (6,150,000) 110,187,500
Gain on disposal 375,000
Dividend Income 512,500 PPE (Tax Base)
Profit Before Tax 36,263,465 Opening 96,550,000

A
Depreciation (8,501,758)
Disposal (450,000)

FC
Accounting Profit 36,263,465 Acquisition 7,500,000
Add: 95,098,242
Accounting Depr 9,385,542 Provision for Bad Debts
Gain on disposal - Tax 575,000 Opening -
Bad Debts Expense 853,750 Provision made 653,750

ir,
Interest on Leased Assets 1,750,222 Closing 653,750
Depreciation on Leased Assets 1,815,212
Donation 562,500 Lease Assets
Less:
Tax Depr
Accounting Gain on Disposal
Debts Written Off
M (375,000)
Opening
(8,501,758) Depreciation

(200,000) Obligation UFL

18,967,327
(1,815,212)
17,152,115
a
Lease Rentals (3,811,581) Opening 17,498,259
az

Dividend Income (512,500) Payment (2,061,359)

Taxable Income 37,804,852 Closing 15,436,900
Brought Frwd Losses (14,251,700)
23,553,152
R

Current Tax - CY (Std Rate) 8,243,603

Current Tax - CY (Reduced Rate) 51,250
ed

Current Tax - PY (630,000)

7,664,853

Particulars CA TB Diff CA TB Diff

hm

PPE 112,723,042 96,550,000 16,173,042 110,187,500 95,098,242 15,089,258

Prov for B. Debts - - - (653,750) - (653,750)
Net Leased Asset 1,469,068 - 1,469,068 1,715,215 - 1,715,215
Brght Frwd Losses (14,251,700) - (14,251,700) - - -
3,390,410 16,150,723
A

Change in Diff
PPE 1,083,784
Prov for B. Debts 653,750
Net Leased Asset (246,147)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Deferred Tax Tax on Acct Profit 12,692,213

Opening 1,186,644 Relief on Donation 196,875
Closing (5,652,753) Tax on Dividend (128,125)
Deferred Tax Charge (4,466,110) Prior yr tax effects (630,000)
12,130,963

Current Tax Expense 7,664,853

Deferred Tax Expense 4,466,110
12,130,963

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 36

Provision for BD Bad Debts Expense

Opening 90 Written off 25
Acctng Profit
(500+25+28) 553 Provision incrs 35 Provision incred 35
Closing bala 125 60
Add
Permanent add backs 35 Property plant (CA) Property plant (TB)

A
Bad debt Expense 60 Opening 1,800 Opening 1,750
PPE Deductible diff 80 Closing 1,850 Closing 1,880
Less

FC
Dividend Income (25) TOAP 193.55
Capital gains (28) Perm Addback 12.25
Written off (25) Dividend Income -6.25
650 227.50 Capit gains -9.80
Low rate income 2.50 Prior year 4.20

ir,
Prior year 4.20 193.95

Particulars CA TB Diff CA TB Diff

Property plant
Prov for BDbts

Deferred Tax Asset

1,800
(90)
1,750
-
M 50
(90)
(40)
(14)
1,850
(125)
1,880
-
(30)
(125)
(155)
(54)
a
Deferred Tax Income 40
az

Deferred Tax Liability on Act Gain 21

CTE - CY 230.00
CTE - PY 4.20
R

234.20
DTIncome -40.25
193.95
ed

Opening Deferred Tax

Related to P/L (Deferred Tax Assets) 14.00
Related to OCI (Deferred Tax Liabilities) -49.00
hm

Deferred Tax Liability -35.00

Closing Deferred Tax

Related to P/L (Deferred Tax Assets) 54.25
Related to OCI (Deferred Tax Liabilities) -70.00
A

Deferred Tax Liability -15.75

 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 37

Partic CA TB Diff CA TB Diff

PPE 2,000.00 1,600.00 400.00 2,700.00 2,400.00 300.00
Provision for Grty (50.00) - (50.00) (51.00) - (51.00)
Time Bared Payables - - - (3.00) - (3.00)
350.00 246.00

Provision for gratuity Deferred Tax Liability

A
Opening 50.00 Opening 122.50
Write off (5.00) Closing 86.10

FC
Payments (3.00) Charge (36.40)
Provision 9.00 (50.40)
51.00

PPE (Carrying Amount) PPE (Tax Base)

ir,
Opening 2,000.00 Opening 1,600.00
Closing (2,700.00) Closing (2,400.00)
Net Change (700.00) Net Change (800.00)

Due to Revalution
Others
40.00
660.00 M -
800.00
a
Deferred Tax Income 49.00 P/L
Deferred Y=Tax Charge (14.00) OCI
az

Provision for Gratuity

Opening 50.00
R

Write Offs (5.00)

Payment (3.00)
Expense 9.00
ed

51.00
Net Change 1.00

Deferred Tax Income 0.35

hm

Time Bared Liabilities

Opening -
Transferred 8.00
Reversed (3.00)
A

Paid (2.00)
3.00
Net Change 3.00

Deferred Tax Income 1.05

Total Deferred Tax Income 50.40

Deferred Tax Expense (14.00)
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 38

PPE (Carrying Amount)

Opening Balance 1,245,500
Accounting Profit 797,000 Depreciation (103,000)
Disposal (700)
Add Additions 123,000
Donation 5,000 Closing balance 1,264,800
Accounting Depr 103,000 PPE (Tax Base)
Tax Gain on disposal 535 Opening Balance 670,000

A
Gratuity increase 33,000 Depreciation (85,000)
Less Disposal (465)

FC
Dividend Income (35,000) Additions 123,000
Capital Gains (135,000) Closing balance 707,535
Tax Depreciation (85,000) Time Bared Payables
Acc Gain on disposal (300) Opening Balance 65,000
Taxable Income 683,235 239,132

ir,
Dividend Income 35,000 1,750
Minimum Tax (65,000) Provision for gratuity
175,882 Opening Balance 105,500
Prior year income 6,400
M
2,240 Net increase
2,240 Closing balance
33,000
138,500
a
Particulars CA TB Diff CA TB Diff
Property Plant 1,245,500 670,000 575,500 1,264,800 707,535 557,265
az

Gratuity (105,500) - (105,500) (138,500) - (138,500)

TB payables (65,000) - (65,000) (65,000) - (65,000)
Taxable Differences 405,000 353,765
R

DTL 141,750 123,818

DTA (65,000) -
76,750 123,818
ed

Deferred Tax Income (47,068)

Tax on A/C profit 278,950

Exempt income (47,250)
hm

Dividend (10,500)
Donations 1,750
Prior Year 2,240
225,190
A

Current Tax - CY 175,882

Current Tax - PY 2,240
178,122
Deferred Tax Income 47,068
225,190
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 39

Accounting Profit 2,200,000

Add
Accounting Depr 20,500,000
Gratuity Accrual 1,200,000
Taxable receipts 5,400,000
Disallowed Expenses 1,000,000

A
Less

FC
Tax Depr (15,500,000)
Gratuity payment (200,000)
Accounting gains (400,000)
Written off Debts recovered (40,000)
Expenses Allowed (120,000)

ir,
Taxable Income 14,040,000

Current Tax Expense 4,914,000

Prior Year Impacts

M (43,750)
a
Prior Year Impacts (190,000)
(233,750)
az

Net Current Tax Expense 4,680,250

R

Accounting and Tax Dep

Tax excess 10,000,000
Further Diff (5,000,000)
5,000,000
ed

Gratuity
Opening 2,500,000
Payment (200,000)
hm

Closing required (3,500,000)

Accruals (1,200,000)
Net Leased Asset
Opening 5,000,000
Disposal -
A

5,000,000

Cash received 5,400,000

Expense carried fwd
Opening 600,000
Accruals 480,000
Allowed 120,000

Disallowed Part 80,000

 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Account Amount Account Amount

DTA 1,750,000 DTI 1,750,000
DTA 350,000 DTI 350,000
DTL 1,750,000 DTI 1,750,000
DTA 168,000 DTI 168,000 880,000 308,000 (140,000)
DTA 43,750 DTI 43,750
4,061,750 4,061,750
Rate Change impact 587,500
4,649,250
2002
Taxable Profit 1,800,000

A
Closing Stock Revers (4,000,000)
Tax Loss (2,200,000) - 810,000 (810,000)

FC
2003
Taxable Profit 1,900,000
Opening Stock 4,000,000
BF Loss (2,200,000)

ir,
Allowed Expense (125,000)
3,575,000 1,430,000 760,000 670,000

2004
Taxable Profit
Expense Allowed
2,100,000
(125,000)
1,975,000
M 790,000 840,000 (50,000)
a
az

(190,000)
2005
Expense Allowed 3,335,207,274 (43,750)
R

Tax On Accounting Profit 770,000

Rate Change (587,500)
Perm Differ 140,000
ed

Income (14,000)
Prior yr Effects (233,750)
Deferred Tax prior Yr (43,750)
31,000
hm

Current Tax CY 4,914,000

PY (233,750)
Deferred Tax Income (4,649,250)
31,000
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 40

Current tax 2001

Tax rate 30%
Accounting profit 50,000
Add:
Accrued expenses 3,000
Fine & penalties 1,500
Deferred cost 5,000
Income in advance 2,000

A
Accounting depreciation 15,000
76,500
Less:

FC
Interest receivable 2,000
Provision for doubtful debt 500
Tax depreciation 20,000
Taxable profit 54,000
Current tax 16,200

ir,
Deferred tax 12,750
Tax expense 28,950

Deferred tax

PPE
Trade receivable
CA
225,000
34,000
2001
TB
200,000
35,500
MTD
25,000
(1,500)
a
Deferred cost 20,000 - 20,000
az

Sundry receivable 15,000 13,000 2,000

Cash & bank balances 11,000 11,000 -
Total Assets 305,000 259,500 45,500
R

Share Capital 200,000 200,000

Retained earnings 70,000 27,500
Loan payable 15,000 15,000 -
ed

Income in advance 2,000 2,000 -

Creditors and accrued liabilities 15,500 12,500 (3,000)
Deferred tax liability 2,500 2,500 -
305,000 259,500 (3,000)
hm

Taxable temporary difference 42,500

Deferred tax liability 12,750
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 41

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 42

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 43

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 44

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 46

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 47

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 48

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 49

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 50

Accounting Calculations
Year Instr FV Time Cumu Exp Expense DTA
1 100,000 3.60 0.33 120,000 120,000 36,000
2 100,000 3.60 0.67 240,000 120,000 72,000
3 100,000 3.60 1.00 360,000 120,000 108,000

DTI
36,000

A
36,000
36,000

FC
Tax calculations
Year Instr FV Time Cumu Exp Expense DTA
1 100,000 3.30 0.33 110,000 110,000 33,000
2 100,000 3.00 0.67 200,000 90,000 60,000
3 100,000 3.80 1.00 380,000 180,000 114,000

ir,
3 100,000 4.00 1.00 400,000 20,000 120,000

DTI Equity Bal

M 33,000
27,000
54,000
6,000
-
-
6,000
12,000
a
Journal Entries
az

Yr 1 Expense 120,000 SBPR 120,000

Yr 1 DTA 33,000 DTI 33,000
R

Yr 2 Expense 120,000 SBPR 120,000

Yr 2 DTA 27,000 DTI 27,000
Yr 3 Expense 120,000 SBPR 120,000
ed

Yr 3 DTA 54,000 DTI 48,000

Equity 6,000
Yr 4 CTA 120,000 CTI 108,000
Equity 12,000
hm

Yr 4 DTE 108,000 DTA 114,000

Equity 6,000
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 51
Accounting Calculations
Year Instr FV Time Cumu Exp Expense DTA
1 1,000 10.00 0.25 2,500 2,500 750
2 1,000 10.00 0.50 5,000 2,500 1,500
3 1,000 10.00 0.75 7,500 2,500 2,250
4 1,000 10.00 1.00 10,000 2,500 3,000
DTI
750
750

A
750
750

FC
Tax calculations
Year Instr FV Time Cumu Exp Expense DTA
1 1,000 5.00 0.25 1,250 1,250 375
2 1,000 10.00 0.50 5,000 3,750 1,500
3 1,000 13.00 0.75 9,750 4,750 2,925

ir,
4 1,000 11.00 1.00 11,000 1,250 3,300
DTI Equity Bal
375 -

M 1,125
1,425
375
-
675
300
a
Yr 1 Expense 2,500 SBPR 2,500
az

Yr 1 DTA 375 DTI 375

Yr 2 Expense 2,500 SBPR 2,500
Yr 2 DTA 1,125 DTI 1,125
R

Yr 3 Expense 2,500 SBPR 2,500

Yr 3 DTA 1,425 DTI 750
Equity 675
ed

Yr 4 Expense 2,500 SBPR 2,500

Yr 4 DTA 375 DTI 750
Equity 375
Yr 4 CTA 3,300 CTI 3,000
hm

Equity 300
Yr 4 DT Exp 3,000 DTA 3,300
Equity 300
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 52 A & B

Accounting Calculations
Year Instr FV Time Cumu Exp Expense DTA
1 2,000 6.00 0.25 3,000 3,000 900
2 2,000 6.00 0.50 6,000 3,000 1,800
3 2,000 6.00 0.75 9,000 3,000 2,700
4 2,000 6.00 1.00 12,000 3,000 3,600
DTI
900

A
900
900

FC
900
Tax calculations
Year Instr FV Time Cumu Exp Expense DTA
1 2,000 6.00 0.25 3,000 3,000 900
2 2,000 10.00 0.50 10,000 7,000 3,000

ir,
3 2,000 7.00 0.75 10,500 500 3,150
4 2,000 6.00 1.00 12,000 1,500 3,600
DTI Equity Bal

M 900
2,100
150
450
-
1,200
450
-
a
Yr 1 Expense 3,000 SBPR 3,000
Yr 1 DTA 900 DTI 900
az

Yr 2 Expense 3,000 SBPR 3,000

Yr 2 DTA 2,100 DTI 900
Equity 1,200
R

Yr 3 Expense 3,000 SBPR 3,000

Yr 3 DTA 150 DTI 900
Equity 750
ed

Yr 4 Expense 3,000 SBPR 3,000

Yr 4 DTA 450 DTI 900
Equity 450
Yr 4 CTA 3,600 CTI 3,600
hm

Yr 4 DT Exp 3,600 DTA 3,600

Part B
P/L Allowed P/L OCI
A

Award 1 30 48 30 18
Award 2 30 24 24 -
54 18
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 53

Accounting Calculations
Year Instr FV Time Cumu Exp Expense DTA
1 100,000 3.60 0.33 120,000 120,000 36,000
2 100,000 3.60 0.67 240,000 120,000 72,000
3 100,000 3.60 1.00 360,000 120,000 108,000
DTI
36,000
36,000

A
36,000
Tax calculations

FC
Year Instr FV Time Cumu Exp Expense DTA
1 100,000 3.30 0.33 110,000 110,000 33,000
2 100,000 3.00 0.67 200,000 90,000 60,000
3 100,000 3.80 1.00 380,000 180,000 114,000
3 100,000 4.00 1.00 400,000 20,000 120,000

ir,
DTI Equity
33,000 (3,000)
27,000 (12,000)

Yr 1 Expense
M 120,000 SBPR
54,000
6,000
6,000
12,000

120,000
a
Yr 1 DTA 33,000 DTI 33,000
az

Yr 2 Expense 120,000 SBPR 120,000

Yr 2 DTA 27,000 DTI 27,000
Yr 3 Expense 120,000 SBPR 120,000
Yr 3 DTA 54,000 DTI 48,000
R

Equity 6,000
Yr 4 CTA 102,000 CTI 91,800
Equity 10,200
ed

Yr 4 DTE 108,000 DTA 114,000

Equity 6,000
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 54

Accounting Calculations
Year Instr FV Time Cumu Exp Expense DTA
1 1,000 120.00 0.33 40,000 40,000 12,000
2 1,000 120.00 0.67 80,000 40,000 24,000
3 1,000 120.00 1.00 120,000 40,000 36,000
DTI
12,000
12,000

A
12,000
Tax calculations

FC
Year Instr FV Time Cumu Exp Expense DTA
1 1,000 140.00 0.33 46,667 46,667 14,000
2 1,000 140.00 0.67 93,333 46,667 28,000
3 1,000 140.00 1.00 140,000 46,667 42,000
DTI Equity

ir,
14,000 2,000
14,000 4,000
14,000 6,000

Yr 0

Yr 0
CTA

DTE
M 42,000 CTI
Equity
36,000 DTL
36,000
6,000
42,000
a
Equity 6,000
az

Yr 1 Expense 40,000 SBPR 40,000

Yr 1 DTA 14,000 DTI 12,000
Equity 2,000
Yr 2 Expense 40,000 SBPR 40,000
R

Yr 2 DTA 14,000 DTI 12,000

Equity 2,000
Yr 3 Expense 40,000 SBPR 40,000
ed

Yr 3 DTA 14,000 DTI 12,000

Equity 2,000
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 55

CA/FV TB Diff
Land and Building 700,000 500,000 200,000
Other PPE 270,000 200,000 70,000
Inventory 80,000 100,000 (20,000)
Account Receivable 150,000 150,000
-
Cash 130,000 130,000 -
Account Payable (160,000) (160,000) -

A
Retirement
(100,000) -
Obligation (100,000)

FC
Net Deductible Differences 1,070,000 150,000
Deferred Tax Liability 60,000

Goodwill
Consideration 1,500,000

ir,
Net Assets 1,070,000
DTL (60,000) 1,010,000
Goodwill 490,000

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 56 A,B,C

Part A
CA / FV TB
PPE 400,000 250,000 150,000
Inventory 350,000 350,000 -
Account Receivable 285,000 290,000
(5,000)
Cash 600,000 600,000 -
Account Payable (200,000) (200,000) -

A
Wages Payable (70,000) - (70,000)
1,365,000 1,290,000 75,000

FC
DT Liability 30,000

Goodwill
Consideration 2,000,000
Net Assets 1,365,000

ir,
DTL (30,000) 1,335,000
Goodwill 665,000

Part B

PPE
Brand Name
CA / FV
400,000
100,000
TB
250,000
-
M 150,000
100,000
a
Inventory 350,000 350,000 -
az

Account Receivable 285,000 290,000

(5,000)
Cash 600,000 600,000 -
Account Payable (200,000) (200,000) -
R

Wages Payable (70,000) - (70,000)

1,465,000 1,290,000 175,000
DT Liability 70,000
ed

Goodwill
Consideration 2,000,000
Net Assets 1,465,000
hm

DTL (70,000) 1,395,000

Goodwill 605,000
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Part C

CA / FV TB
PPE 400,000 250,000 150,000
Brand Name 100,000 - 100,000
Inventory 350,000 350,000 -
Account Receivable 285,000 290,000
(5,000)
Cash 600,000 600,000 -
Account Payable (200,000) (200,000) -

A
Contingent Liability (45,000) -
(45,000)

FC
Wages Payable (70,000) - (70,000)
1,420,000 1,290,000 130,000
DT Liability 52,000

Goodwill

ir,
Consideration 2,000,000
Net Assets 1,420,000
DTL (52,000) 1,368,000
Goodwill 632,000

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 57

Net Assets CA/FV TB Diff

Existing Assets 100,000 100,000 -
Customer List 10,000 - 10,000
Develop Cost 4,500 - 4,500
14,500
Deferred Tax Liability 5,800

Goodwill

A
Consideration 150,000
Net Assets

FC
Existing 100,000
New 14,500
DT Liability (5,800) (108,700)
Goodwill 41,300

ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 58

Net Assets CA/FV TB Diff

Existing Assets 250,000 250,000 -
Customer List 50,000 - 50,000
Develop Cost 25,600 - 25,600
Conting Liab (32,000) - (32,000)
43,600
Deferred Tax Liability 17,440

A
Goodwill
Consideration 375,000

FC
Net Assets
Existing 250,000
New 75,600
Conting Liab (32,000)
DT Liability (17,440) (276,160)

ir,
Goodwill 98,840

M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 59

Net Assets CA/FV TB Diff

Existing Assets 125,000 125,000 -
Customer List 16,000 - 16,000
Develop Cost 42,000 - 42,000
Conting Liab (4,200) - (4,200)
53,800
Deferred Tax implications
Deferred Tax Liability 21,520

A
Utilised Losses
By parent 12,000 (3,600)

FC
By subsidiary 14,000 (5,600)
Net Deferred Tax Liability 12,320

Goodwill
Consideration 224,000

ir,
Net Assets
Existing 125,000
New 58,000
Conting Liab
DT Liability
Goodwill
(4,200)
(12,320)
M (166,480)
57,520
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 60

Net Assets CA/FV TB Diff

Existing Assets 200,000 200,000 -
Customer List 12,400 - 12,400
Develop Cost 13,600 - 13,600
Conting Liab (6,700) - (6,700)
19,300
Deferred Tax implications
Deferred Tax Liability 7,720

A
Utilised Losses
By parent 12,000 (3,600)

FC
By subsidiary 21,000 (8,400)
Replacement award (Parent) (3,270)
Net Deferred Tax Asset (7,550)

Goodwill

ir,
Consideration 298,000
Replacement award 14,000
312,000
Net Assets
Existing
New
Conting Liab
200,000
26,000
(6,700)
M
a
DT Asset 7,550 (226,850)
Goodwill 85,150
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 61

CA in group FS 16,000
Tax base (20,000)
(4,000)
DTA (1,600)

CA in goup FS 11,900
Tax base (14,000)
(2,100)

A
DTA (840)

FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 62

Cost of Investment 140,000

Net retained profit 6,400
146,400
Tax base (140,000)
6,400
Capital gain 2,560 448
Dividend 3,840 461
Deferred Tax Liability 909

A
FC
ir,
M
a
az
R
ed
hm
A
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Question 64

Working 1
Fair Value of net Assets at acquisition

Total assets (excluding DTA) 3,594.00 GW 353

Liabilities (1,888.00) NA 1,706
Book Value of NA 1,706.00
Development Cost 153.00 DC 128
Contingent Liability (25.00) DTL 47

A
Fair Value of NA (Excluding DT) 1,834.00 Cash 2,140 0.00
Deferred Tax liability (47.05)

FC
Fair Value of NA 1,786.95

Goodwill
Consideration (Rs Million)
Cash consideration 2,000.00

ir,
Replacement awards 140.00
2,140.00
Fair value of net Assets (1,786.95)
Goodwill

Deferred Tax at initial recognition

353.05

M
a
Asset / Liabilities Fair Value Tax Base Differences Rate Deferred Tax
az

Property plant and Equip 1,532.00 887.00 645.00 35% 225.75

Investment 490.00 290.00 200.00 35% 70.00
Retirement Benefits (60.00) - (60.00) 35% (21.00)
Development Cost 153.00 - 153.00 35% 53.55
R

Contingent Liability (25.00) - (25.00) 35% (8.75)

Share options (90.00) - (90.00) 25% (22.50)
Brought FWD losses (500.00) 35% (175.00)
ed

Brought FWD losses (300.00) 25% (75.00)

47.05
Opening Deferred Tax Asset
hm

Account Heads CA TB Difference

Property, plant and Equip 1,259 887 372
Investments 367 290 77
Retirement Benefits (17) - (17)
Share options (90) - (90)
A

Brought FWD losses (500) - (500)

Differences (158)
Rate 35%
Deferred Tax Asset opening -55.3000
Deferred Tax liability accounted for in Acquisition 47.05
Net Charge (DTE charged to G/W) 102.35
 Advanced Accounting and Financial Reporting
IAS 12 Deferred Tax
Ahmed Raza Mir, FCA

Alternative Working

Asset / Liabilities Fair Value CA Differences Rate

Property plant and Equip 1,532 1,259 273 35% 95.55
Investment 490 367 123 35% 43.05
Retirement Benefits (60) (17) (43) 35% -15.05
Development Cost 153 - 153 35% 53.55
Contingent Liability (25) - (25) 35% -8.75
Brought FWD losses (300) 25% -75.00
Deferred Tax charged 93.35

A
Rate change impact on share options 9.00
Deferred net Charge to goodwill 102.35

FC
Deferred Tax charge for the year
Net Change on business combination 102.35
Deferred Tax on Unrealized profit

ir,
Held by PAL (80*.2*.35) 5.60
Held by LG (140*.15*.25) 5.25
On undistributed income of associate
Through Dividend
Through realized gains
Net Deferred Tax charge for the year
(30*.3*.6*.125)
(30*.3*.4*.175)
M 0.68
0.63
114.51
a
az
R
ed
hm
A