International Accounting Standards permit certain assets to be carried at fair value or to be revealed (examples in IAS 16, property and plant equipment. IAS 38, Intangible assets, IAS 39, financial instrument Recognition and measurement and IAS 40 investment property). 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 differences 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 enterprise and the amount that will be deductible for tax purposes will differ from the amount of those economic benefits. The differences between the carrying amount of a revalued asset and its base is a temporary difference and gives rise to a deferred tax liability or asset. This is true even if;
(a) The enterprise does not intend to dispose of the assets. In such cases the revalued carrying amount of the asset will be recovered through use and this will generate taxable income which exceeds the depreciation that will be allowable for tax purposes in future periods; or
(b) Tax on capital gains is deferred if the periods of the disposal of the assets are invested in similar assets. In such cases the tax will ultimately become payable on sale or use of the similar assets.
Wilfykil answered the question on February 8, 2019 at 08:14
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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