Djokovic plc prepares its financial statements to 31 December each year. Profit before taxation for the year ended 31 December 2017 was 220,000. Taxable profit for the same period was 45,000. The following data relates to the year ended 31 December 2017 : 1. On 1 January 2017, Djokovic plc opened a deposit account with The French Open bank. Djokovic plc lodged 1,200,000 on that date at a 5% rate of interest. Deposit interest will be paid semi-annually, in arrears, in August and February of each year. Interest for the first six months was duly received on 1st August 2017 . This interest was credited to Djokovic plc's profit or loss statement for the year ended 31 December 2017. 2. At 31 December 2017, Djokovic ple had non-current assets which had a cost of 770,000. Depreciation to that date amounted to 280,000 while capital allowance amount to 410,000. 3. Djokovic plc's defined benefit pension scheme is managed by Grand Slam investment bank. Djokovic plc paid 76,000 into the pension scheme in February 2018. This was treated as an accrued pension expense in computing accounting profit for the year ended 31 December 2017. 4. One of the group's subsidiaries, Davis plc, made a tax loss of 6,500 during the year. The only relief for this tax loss is to carry it forward to offset against future taxable profits of the company. Davis plc is expected to be profitable in future years. It has been discovered that there was an under provision for 2016 current tax to the value of 46,000 which now appears as an opening liability in the current tax account. 5. The balance on the accounts receivable is 124,000 after a general allowance for doubtful debts of 34,000 was charged to the profit or loss for the year ending 31 December 2017. The following trial balance extracts relate to Djokovic plc at 31 December 2017 : The corporation tax rate is expected to be 30% and the capital gains tax rate 25% for the foreseeable future. Djokovic plc accounts for its deferred tax in accordance with IAS 12, Income Taxes. (a) (i) Prepare a table showing the carrying values, tax bases and temporary differences for each of the items above for the year ended 31 December 2017. (8 marks) (ii) Show the relevant extracts of Djokovic plc's Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position for the year ended 31 December 2017. (7 marks) (b) Explain the concept of the tax base of an asset. How does this concept help to identify situations in which deferred tax adjustments are required? (5 marks) (c) It is important that external stakeholders obtain a clear idea about which transactions and their related impact are included in the annual reports and which transactions and events and their related financial impact have not been taken into account in the financial statements. How does IAS 10, Events after the Reporting Period help stakeholders in this area? (d) Melbourne News plc is a manufacturer of lots of news and its year-end is 31 December 2017. Melbourne News plc has an investment worth 1,000,000 in its financial statements at 31 December 2017. Due to the continuing recession, the investment reduced in value to 900,000 by 15 January 2018 . How should this item be treated in the financial statements of Melbourne News plc for the year ended 31 December 2017? (2 marks) Total 25 marks Djokovic plc prepares its financial statements to 31 December each year. Profit before taxation for the year ended 31 December 2017 was 220,000. Taxable profit for the same period was 45,000. The following data relates to the year ended 31 December 2017 : 1. On 1 January 2017, Djokovic plc opened a deposit account with The French Open bank. Djokovic plc lodged 1,200,000 on that date at a 5% rate of interest. Deposit interest will be paid semi-annually, in arrears, in August and February of each year. Interest for the first six months was duly received on 1st August 2017 . This interest was credited to Djokovic plc's profit or loss statement for the year ended 31 December 2017. 2. At 31 December 2017, Djokovic ple had non-current assets which had a cost of 770,000. Depreciation to that date amounted to 280,000 while capital allowance amount to 410,000. 3. Djokovic plc's defined benefit pension scheme is managed by Grand Slam investment bank. Djokovic plc paid 76,000 into the pension scheme in February 2018. This was treated as an accrued pension expense in computing accounting profit for the year ended 31 December 2017. 4. One of the group's subsidiaries, Davis plc, made a tax loss of 6,500 during the year. The only relief for this tax loss is to carry it forward to offset against future taxable profits of the company. Davis plc is expected to be profitable in future years. It has been discovered that there was an under provision for 2016 current tax to the value of 46,000 which now appears as an opening liability in the current tax account. 5. The balance on the accounts receivable is 124,000 after a general allowance for doubtful debts of 34,000 was charged to the profit or loss for the year ending 31 December 2017. The following trial balance extracts relate to Djokovic plc at 31 December 2017 : The corporation tax rate is expected to be 30% and the capital gains tax rate 25% for the foreseeable future. Djokovic plc accounts for its deferred tax in accordance with IAS 12, Income Taxes. (a) (i) Prepare a table showing the carrying values, tax bases and temporary differences for each of the items above for the year ended 31 December 2017. (8 marks) (ii) Show the relevant extracts of Djokovic plc's Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position for the year ended 31 December 2017. (7 marks) (b) Explain the concept of the tax base of an asset. How does this concept help to identify situations in which deferred tax adjustments are required? (5 marks) (c) It is important that external stakeholders obtain a clear idea about which transactions and their related impact are included in the annual reports and which transactions and events and their related financial impact have not been taken into account in the financial statements. How does IAS 10, Events after the Reporting Period help stakeholders in this area? (d) Melbourne News plc is a manufacturer of lots of news and its year-end is 31 December 2017. Melbourne News plc has an investment worth 1,000,000 in its financial statements at 31 December 2017. Due to the continuing recession, the investment reduced in value to 900,000 by 15 January 2018 . How should this item be treated in the financial statements of Melbourne News plc for the year ended 31 December 2017? (2 marks) Total 25 marks