ACCA · Question 12 · Preparation of Single Entity Financial Statements
SECTION A
Delta Corp revalued its land during the year, resulting in a revaluation surplus of $500,000. The tax base of the land remains at its original cost. The corporate income tax rate is 25%.
How should the deferred tax consequence of this revaluation be recognized in the financial statements under IAS 12 Income Taxes?
Answer options:
Recognize a deferred tax liability of $125,000 with the corresponding charge to Profit or Loss.
Recognize a deferred tax liability of $125,000 with the corresponding charge to Other Comprehensive Income (OCI).
No deferred tax is recognized because land is not depreciated.
Recognize a deferred tax asset of $125,000 in OCI.
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