Page 8 - 2. COMPILER QB - INDAS 12

90,000 80,000 -10,000
Deferred Tax Liability
Previously recognised expense 67,500 60,000 -7,500
Net Adjustment (2,500)

An alternative method of calculations:
DTA shown in OCI 70,000 x (0.45 - 0.40) 3,500
DTA shown in Profit or Loss 1,30,000 x (0.45-0.40) 6,500
DTL shown in Profit or Loss 1,50,000 x (0.45 -0.40) 7,500

Journal Entries
Deferred Tax Assets Dr. 3,500
To OCI – Revaluation Surplus 3,500
Deferred Tax Assets Dr. 6,500
To Deferred Tax Expenses 6,500
Deferred Tax Expense Dr. 7,500
To Deferred Tax Liability 7,500

Note - when a new tax rate is substantially enacted, all the existing DTA / DTL items need to be adjusted in

such a manner so as to bring them to the values as per the new rate.

Q5 (Nov. 20)

On 1 January 2020, entity H acquired 100% share capital of entity S for Rs.15,00,000. The book values and the

fair values of the identifiable assets and liabilities of entity S at the date of acquisition are set out below,
together with their tax bases in entity S’s tax jurisdictions. Any goodwill arising on the acquisition is not
deductible for tax purposes. The tax rates in entity H’s and entity S’s jurisdictions are 30% and 40%

respectively.

Acquisitions Book Values Tax Base Fair Values
Rs. ‘000 Rs. ‘000 Rs. ‘000
Land and Building 600 500 700
Property, Plant & Equipment 250 200 270

Inventory 100 100 80
Account Receivable 150 150 150

Cash & Cash Equivalents 130 130 130
Accounts Payable -160 -160 -160
Retirement benefit Obligations -100 - -100

You are required to calculate the deferred tax arising on acquisition of Entity S. Also calculate the Goodwill
arising on acquisition.

2. 7