ACCA · Question 10 · IAS 12 Income Taxes
Section A
PropInvest owns an investment property measured at fair value under IAS 40. The property was purchased for $2 million. At the year-end, its fair value has increased to $2.8 million. The local tax authority does not tax unrealized gains on investment properties until they are sold. The corporate tax rate is 25%.
How should the deferred tax consequence of this revaluation be accounted for in the financial statements?
Answer options:
Recognize a deferred tax liability of $200,000 with the corresponding charge to Other Comprehensive Income (OCI).
Recognize a deferred tax liability of $200,000 with the corresponding charge to profit or loss.
No deferred tax is recognized because the gain is unrealized and not currently taxable.
Recognize a deferred tax asset of $200,000 with the corresponding credit to profit or loss.
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