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Each of the statements below is either true (T) or false (F): A company has recognised $80,000 rental expense during the financial year. At the
Each of the statements below is either true (T) or false (F):
- A company has recognised $80,000 rental expense during the financial year. At the beginning of the financial year, the opening balance of the related prepaid rent asset was $20,000. At the end of the financial year, the closing balance of prepaid rent asset was $25,000. Rental expense is tax deductible when it is paid. Therefore, for tax purposes, the deductible amount for rental expense this financial year is $75,000.
- A company has an investment in government bonds and receives non-taxable interest income from the bonds. Therefore, the tax base of the investment in government bonds is different from its carrying amount.
- A company can only recognise deferred tax assets when it is probable that taxable profits will be available against which the deductible temporary differences can be utilised in the future.
- If a liability is revenue received in advance, the tax base of the liability is its carrying amount minus any amount of the revenue that will be taxable in future periods.
- A company spent $1m for developing a project and recognised this amount as a development asset on balance date. The Inland Revenue allows for a tax deduction when the development cost is paid for. Therefore, the tax base of the development asset is zero.
- All taxable temporary differences give rise to a deferred tax liability, with certain exceptions.
- Companies can choose whether or not to discount their deferred tax assets or liabilities.
- A company recognised a salary payable on balance date. For tax purposes, the salary expense is deductible when incurred. Therefore, the tax base of the salary payable is different from the carrying amount.
REQUIRED:
Using WORKSHEET 2 that is provided on pages 11 and 12 of the Answer Booklet, indicate for each of the statements above whether it is T or F according to NZ IAS 12. If the statement is false, rewrite the statement to make it true, otherwise leave it blank.
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