Question

In the deferred tax worksheet, can you explain the concepts of calculating the future deductible amount of plant/ equipment?
Is it just cost minus the accumulated depreciation of plant/ equipment (Tax) ?

Answer 1

Concept of Future Deductible Amount

Future Deductible Amount means the amount which will reduce the outflow of tax in future, It May be treated as Deferred Tax asset as tax belongs to particular item is already paid as per the taxations rules but As per the accounting purpose the amount of expenses shall be recognised only when actually liable to or paid for or acccounting Standards allows to recognise the incomes , so it lead to early payment of taxes and it reduce the burden to pay

Because tax paid on particular amount cannot be Taxed again , here we paid early so recognised as future Deductible amount ie deferred tax asset

I.e It leads to reduction in tax payable in future due to early pay or tax can be refunded.

The temporary differences which leads to Future deductible amounts

It is just not cost less accumulated depreciation but it is just temporary differences raised because of recognition differences as per tax laws and Accounting Standards in recording income or Expenses. Like Depreciation Expenses ,An Impact of Differences in Depreciation Rates as per tax laws and Accounting Laws