The Company is in process of finalizing its financial statements for the year ended 31 December 2017. The following information has been gathered for preparing the disclosures relating to taxation: (i) Profit before tax for the year after making all necessary adjustments was Rs. 103 million. (ii) Expenses include: . donations of Rs. 12 million not allowable for tax purposes. accruals of Rs. 30 million which will be allowed in tax on payment basis. (iii) Other income includes government grant of Rs. 10 million and dividend of Rs. 4 million. Government grant is not taxable while dividend income is subject to tax rate of 10%. (iv) Accounting depreciation for the year exceeds tax depreciation by Rs. 20 million. (v) On 31 December 2017 buildings were revalued for the first time resulting in a surplus of Rs. 60 million. Revaluation does not affect taxable profits. (vi) On 1 January 2017 CO had issued 1.5 million 10% convertible Term Finance Certificates (TFCs) of Rs. 100 each. Interest is payable annually on 31 December whereas the principal is to be paid at the end of 2020. Two TFCs are convertible into one ordinary share at any time prior to maturity. On the date of issue, the prevailing interest rate for similar debt without conversion option was 12% per annum. The tax authorities do not allow any deduction for the imputed discount (Finance Cost) on the liability component of the convertible TFCs. (vii) Net deferred tax liability as on 1 January 2017 arose on account of: Rs. in million Property, plant and equipment (Rs. 95 million x 35%) 33.25 (viii) The tax rate for 2017 is 30% while it was 35% in 2016 and prior periods. Required: 1. Prepare notes on taxation (Current tax & deferred tax to be reported in P&L). (10 marks) 2. Deferred tax liability/asset for inclusion in FS. (10 marks)