MFRS 112 Deferred Tax

Shukubutsu, Japanese manufacturer in Malaysia, has the following statement of financial statement and tax bases at 30 June 2021:

Additional Information:

i) On 30 June 2021, Shukubutsu's revalued land and some of the plant. Fair value of the land was RM5 million more than its carrying amount and the plant was RM30 million more than the carrying amount.

ii) Shukubutsu's provides for general provisions for doubtful debts of 10%. Tax rule recognises bad debts only.

iii) A loan was raised during the year and recorded it net of transaction costs. The transaction costs are allowable for tax in the year in which the loan is raised.

iv) Income tax had changed from 30% to 25%.

Required:

a) During a management meeting, Mr Harakiri, a director from Japan, indicates that never in his past experiences in Japan had he encountered any discussions involving the need to make any adjustment for the tax in the preparation of a company's account. He argues that the tax paid by the company to the tax authorities will be similar to its tax expenses presented in the financial statements.

Explain to him the differences between tax rules and financial accounting and reporting standards that might cause the tax calculated for tax purpose and accounting purpose to differ, especially in the context of Malaysian tax and accounting systems.

(10marks)

b) Compute the deferred tax expenses for Shukubutsu's for the year 30 June 2021. (15 marks)