Page 205 - SBR Integrated Workbook STUDENT S18-J19
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Tax
Deferred tax: Specific situations
3.1 Revaluation of property, plant and equipment
Deferred tax should be recognised on asset revaluations, even if there is no intention
to sell the asset.
Revaluation gains are recorded in other comprehensive income and so any deferred
tax arising on the revaluation must also be recorded in other comprehensive income.
Example 3
Revaluations
An item of property, plant and equipment (PPE) was carried in the financial
statements at $3 million and had a tax written down value of $2 million. At 31
December 20X1 it was then revalued to $5 million in the financial statements.
No tax is payable on fair value gains until the disposal of the PPE.
The tax rate is 30%. The brought forward deferred tax liability related to this
asset was $0.1 million.
Discuss the deferred tax implications of the above.
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