Skip to content

CA Final · Financial Reporting · Ind AS 12 Income Taxes

Kaveri Realty Ltd owns an office building held to earn rentals, which it classifies as investment property. At the reporting date the building's cost is ₹50,00,000 and accumulated depreciation as per books is ₹6,00,000. The tax written-down value is ₹40,00,000. The fair value is ₹60,00,000, disclosed in the notes as required. The tax rate is 25% and the company has sufficient future taxable profit. How much deferred tax should be recognised on this building?

The company recognises a deferred tax liability of ₹1,00,000. Under Ind AS 40 the property is carried at cost less depreciation, ₹44,00,000, against a tax base of ₹40,00,000. The ₹4,00,000 taxable temporary difference at 25% gives the liability. Disclosed fair value is ignored.

  1. ADeferred tax liability of ₹1,00,000Correct
  2. BDeferred tax liability of ₹5,00,000
  3. CDeferred tax asset of ₹1,00,000
  4. DDeferred tax liability of ₹11,00,000

Explanation

Ind AS 40 has no fair value model, so the building is measured at cost less depreciation. Carrying amount is 50,00,000 − 6,00,000 = ₹44,00,000 against a tax base of ₹40,00,000. The taxable temporary difference is ₹4,00,000, giving a DTL of 25% × 4,00,000 = ₹1,00,000. Using the fair value of ₹60,00,000 (DTL ₹5,00,000) is wrong because fair value is only disclosed.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 12 Income Taxes shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 12 Income TaxesFree diagnostic mock

More Ind AS 12 Income Taxes questions