Each of the statements below is either true (T) or false (F): (a) 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. (b) 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. (c) 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. (d) 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. (e) 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. (f) All taxable temporary differences give rise to a deferred tax liability, with certain exceptions. (g) Companies can choose whether or not to discount their deferred tax assets or liabilities. (h) 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 Tor Faccording to NZ IAS 12. If the statement is false, rewrite the statement to make it true, otherwise leave it blank. Each of the statements below is either true (T) or false (F): (a) 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. (b) 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. (c) 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. (d) 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. (e) 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. (f) All taxable temporary differences give rise to a deferred tax liability, with certain exceptions. (g) Companies can choose whether or not to discount their deferred tax assets or liabilities. (h) 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 Tor Faccording to NZ IAS 12. If the statement is false, rewrite the statement to make it true, otherwise leave it blank
