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COMPLEX GROUPS
Vertical groups - example
Revaluation not recorded in the records of the subsidiary
• Land belonging to Centre Ltd was revalued at acquisition; however, the
revaluation was not recorded in the books of Centre Ltd. An adjustment
is required for consolidation purposes to recognise the revalued assets
of the subsidiary (the revaluation is included in the analysis). A pro
forma journal entry has to be passed on consolidation to bring the
revaluation into account (refer J1).
Deferred tax on revaluation
• If land is revalued, deferred tax should be provided for on the total
surplus above original cost at 22,4% (80% x 28%), irrespective of
whether or not there is any intention to dispose of the land, as the
carrying amount of the land (a non-depreciable asset) can only be
recovered by means of sale.
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