Discuss whether revaluation of non-current asset will lead to a deferred tax asset or a tax...

Discuss whether revaluation of non-current asset will lead to a deferred tax asset or a tax liability.

Expert Solution

In some jurisdictions, the revaluation or other restatement of an asset to fair value affects taxable profit (tax loss) for the current period. As a result, the tax base of the asset is adjusted and no temporary difference arises. In other jurisdictions, the revaluation or restatement of an asset does not affect taxable profit in the period of the revaluation or restatement and, consequently, the tax base of the asset is not adjusted. Nevertheless, the future recovery of the carrying amount will result in a taxable flow of economic benefits to the entity and the amount that will be deductible for tax purposes will differ from the amount of those economic benefits. The difference between the carrying amount of a revalued asset and its tax base is a temporary difference and gives rise to a deferred tax liability or asset

Non-current Asset(NCA) revaluation creates difference in tax base of Asset and their carrying value. Any upward revaluation in NCA will lead to Deferred tax Liability and any downward revaluation will lead to a Deferred Tax Asset.

ekkarill92 answered 1 year ago

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