Question
Ball Ltd has recently revalued its land from its historical cost of $500,000 to its fair value of $2,000,000. Ball Ltd has no current intention
Ball Ltd has recently revalued its land from its historical cost of $500,000 to its fair value of $2,000,000. Ball Ltd has no current intention to sell this land but anticipates that it will sell the land in 10 years' time. The discount rate applicable to Ball Ltd is 5%. The accountant of Ball Ltd is not sure of the amount of the deferred tax liability that needs to be shown in the financial statements and whether the deferred tax liability will need to be discounted as it is probably due only in 10 years' time.
REQUIRED:
Explain to the accountant the amount of the deferred tax liability and whether the deferred tax liability needs to be discounted to present value in the financial statements of Ball Ltd. (no journal entries are required, but you should critically comment on the current accounting standard AASB 112 on (non)discounting)
Step by Step Solution
3.46 Rating (162 Votes )
There are 3 Steps involved in it
Step: 1
In this scenario Ball Ltd has revalued its land from its historical cost to its fair value resulting in a significant increase in the lands value from ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started