SECTION A

During the year ended 31 December 20X9, Alpha Co revalued its headquarters building upwards by $2,000,000. The corporate tax rate is 25%. The tax base of the building did not change as a result of the revaluation.

What is the correct accounting entry to record the deferred tax impact of this revaluation?

Under IAS 12, a revaluation of an asset creates a taxable temporary difference because the carrying amount increases while the tax base remains the same. This results in a deferred tax liability ($2m * 25% = $500k). Because the revaluation gain is recognized in Other Comprehensive Income (OCI), the corresponding deferred tax must also be recognized in OCI.