06-14-2010, 12:38 AM
Written down value as at the date of revaluation was 800.
The appreciated value after revaluation was 1200.
I assumed that diminishing balance method of depreciation is being used, so appreciated value is arrived at by summing up (opening wdv) 800 and (surplus arising) 400.
The surplus arising was (1200-800) = 400; rate of depreciation 10% so the incremental depreciation will be 40. It's simple.
Let me know if it is not clear.
Surplus on revaluation is not a permanent difference. It's a lengthy subject and much of time is needed to clarify how it is not permanent.
Yet IAS-12 says that the deferred tax pertaining to items directly reported in equity has to be recognised in equity and no impact will go to profit and loss account. You might have seen that liability of deferred tax on surplus was not created by debiting tax expense/provision. Rather, surplus has been debited to comply the requirement of IAS-12.
For the issue why it is not permanent difference, I suggest you to study IAS-12 (specially paragraphs 61A to 65A) and interpretations issued under it specially pertaining to the one which deals with surplus arising on revaluation of land.
Regards,
The appreciated value after revaluation was 1200.
I assumed that diminishing balance method of depreciation is being used, so appreciated value is arrived at by summing up (opening wdv) 800 and (surplus arising) 400.
The surplus arising was (1200-800) = 400; rate of depreciation 10% so the incremental depreciation will be 40. It's simple.
Let me know if it is not clear.
Surplus on revaluation is not a permanent difference. It's a lengthy subject and much of time is needed to clarify how it is not permanent.
Yet IAS-12 says that the deferred tax pertaining to items directly reported in equity has to be recognised in equity and no impact will go to profit and loss account. You might have seen that liability of deferred tax on surplus was not created by debiting tax expense/provision. Rather, surplus has been debited to comply the requirement of IAS-12.
For the issue why it is not permanent difference, I suggest you to study IAS-12 (specially paragraphs 61A to 65A) and interpretations issued under it specially pertaining to the one which deals with surplus arising on revaluation of land.
Regards,
