Page 447 - SBR Integrated Workbook STUDENT S18-J19

Answers

Chapter 13

Example 1

Temporary differences
Carrying amount Tax Base Difference

$ $ $
Accrued Expense (1,000) nil (1,000) A
Prepaid Expense 2,000 nil 2,000 L
PPE 90,000 60,000 30,000 L

Contract liability (10,000) nil (10,000) A

Example 2

Financial assets

The financial assets are measured at fair value through profit or loss. They
should have been initially recorded at $5 million. At the year end, they will be
revalued to $6 million, with a gain of $1 million recorded in profit or loss.

The carrying amount of the asset is $6 million and its tax base is $5 million.
There is a taxable temporary difference of $1 million. A deferred tax liability of
$0.2 million should be recognised (($6m – $5m) × 20%), as well as a
corresponding increase to the tax expense in the statement of profit or loss.

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