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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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