02-14-2008, 12:55 AM
Dear Mr KamranACA I want some explanation,
As per accounting rule we add share in post acquisition profits of associate and less any dividends received from it to calculate the investment in associate.
IAS 12 says that An entity shall recognize a deferred tax liability for all taxable temporary differences associated with investment in associates, subsidiaries, branches and joint ventures except to the extent that both of the following conditions are satisfied
==>The parent investor or venturer is able to control the timing of reversal of temporary difference.
==>It is probable that temporary difference will not reverse in foreseeable future.
So, If these two exceptions are not applicable then we have to realize the temporary difference.
As per taxation rules when we adjust accounting profit in to taxable profits we deduct the share in associate(due to which current tax liability reduced) and add back the dividend received from associate(which give raise to current tax liability) and normally it proves to be tax efficient as current tax liability saved.
My question is that, for deferred tax 'Carrying Amount' we pick the balance sheet value of Investment in Associate(which is Cost of Investment plus share in post acquisition profits of Associate) how we calculate the tax base for it???
I am solving a question but there was an statement given that <b>"In Tax records investment in associate appears at cost which is Rs 105,000"</b><i>and this is the tax base for an associate which is already given but i want to know how to calculate this.</i>
I hope you will help me regarding this.
Regards,
Muhammad Amir
As per accounting rule we add share in post acquisition profits of associate and less any dividends received from it to calculate the investment in associate.
IAS 12 says that An entity shall recognize a deferred tax liability for all taxable temporary differences associated with investment in associates, subsidiaries, branches and joint ventures except to the extent that both of the following conditions are satisfied
==>The parent investor or venturer is able to control the timing of reversal of temporary difference.
==>It is probable that temporary difference will not reverse in foreseeable future.
So, If these two exceptions are not applicable then we have to realize the temporary difference.
As per taxation rules when we adjust accounting profit in to taxable profits we deduct the share in associate(due to which current tax liability reduced) and add back the dividend received from associate(which give raise to current tax liability) and normally it proves to be tax efficient as current tax liability saved.
My question is that, for deferred tax 'Carrying Amount' we pick the balance sheet value of Investment in Associate(which is Cost of Investment plus share in post acquisition profits of Associate) how we calculate the tax base for it???
I am solving a question but there was an statement given that <b>"In Tax records investment in associate appears at cost which is Rs 105,000"</b><i>and this is the tax base for an associate which is already given but i want to know how to calculate this.</i>
I hope you will help me regarding this.
Regards,
Muhammad Amir
