Question 1

Section A

BioMeat R&D Co develops lab-grown proteins. During the year ended 31 December 20X8, the company capitalized development costs of $800,000. For tax purposes, development costs are fully deductible in the year they are incurred. The company's tax rate is 25%. At 1 January 20X8, the deferred tax liability balance was $150,000. The carrying amount of the capitalized development costs at 31 December 20X8, after amortization, is $720,000.

What is the deferred tax charge or credit to the statement of profit or loss for the year ended 31 December 20X8?

Accepted Answer

Determine the carrying amount and the tax base of the asset at year-end. Calculate the closing deferred tax liability. Compare it to the opening balance to find the movement (charge or credit) for the year.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Selecting the closing balance ($180,000) instead of the movement for the year.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 6

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