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CMA Final · Corporate Financial Reporting · Income Taxes (Ind AS 12)

Himalaya Estates Ltd revalues freehold land from Rs 50,00,000 to Rs 80,00,000 under Ind AS 16, crediting revaluation surplus in OCI. The tax base of the land stays at Rs 50,00,000. The tax rate that would apply on recovering the carrying amount through sale is 20%. What amount is finally credited to revaluation surplus within OCI, after recognising the related deferred tax?

Rs 24,00,000 is credited to revaluation surplus in OCI. The gain of Rs 30,00,000 creates a deferred tax liability of Rs 6,00,000 at 20%, and that tax is charged to OCI because the revaluation itself was recognised outside profit or loss.

  1. ARs 30,00,000
  2. BRs 6,00,000
  3. CRs 24,00,000Correct
  4. DRs 18,00,000

Explanation

The revaluation gain is 30,00,000. The taxable temporary difference of 30,00,000 gives a DTL of 6,00,000 at 20%. Because the revaluation itself is recognised in OCI, the related deferred tax is also recognised in OCI. Net surplus = 30,00,000 - 6,00,000 = 24,00,000. Rs 30,00,000 ignores the tax effect.

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