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Chapter 12

3.5 Consolidation issues: PURPs

A provision for unrealised profit adjustment (PURP) reduces the carrying amount of
inventory in the consolidated financial statements. It has no impact on the tax base of
the inventory.

A deductible temporary difference is created, giving rise to a deferred tax asset in the
consolidated financial statements.

Illustrations and further practice

Now try TYU question 8 from Chapter 12

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