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ACCA SBR Important Points - Asra
Strategic Business Reporting (SBR) (Association of Chartered Certified Accountants)
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ACCA SBR Important
Points
(Definitions & Very important
points are Highlighted)
When an entity disposes off a small part of the control of the subsidiary, the relevant portion
of the exchange rate gain should be re attributed to the NCI, rather than the Retained
Earnings.
Contingent consideration should be included at its fair value which should be assessed
taking into account the probability of the targets being achieved as well as being discounted
to present value.
IFRS 9 Financial Instruments requires that a financial asset only qualifies for derecognition
once the entity has transferred the contractual rights to receive the cash flows from the asset
or where the entity has retained the contractual rights but has an unavoidable obligation to
pass on the cash flows to a third party. The substance of the disposal of the bonds needs to
be assessed by a consideration of the risks and rewards of ownership.
Important Notes for Ethics Questions
- Accountants have a duty to ensure that the financial statements are fair, transparent and
comply with accounting standards.
- The accountant appears to have made a couple of mistakes which would be unexpected
from a professionally qualified accountant.
- Accountants must carry out their work with due care and attention for the financial
statements to have credibility. They must therefore ensure that their knowledge is kept up to
date and that they do carry out their work in accordance with the relevant ethical and
professional standards. Failure to do so would be a breach of professional competence.
- The accountant must make sure that they address this issue through, for example, attending
regular training and professional development courses.
- Accountants have an ethical duty to be professionally competent and act with due care and
attention. It is fundamental that the financial statements comply with the accounting
standards and principles which underpin them.
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- This may be a genuine mistake but even so would not be one expected from a
professionally qualified accountant. The financial statements must comply with the fair
presentation principles embedded within IAS 1 Presentation of Financial Statements.
The new Conceptual Framework states that assets and liabilities should be recognised if
such recognition provides users of financial statements with:
(a) relevant information about the asset or the liability and about any income, expenses or
changes in equity;
(b) a faithful representation of the asset or the liability and of any income, expenses or changes
in equity; and
(c) information which results in the benefits exceeding the cost of providing that information.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors states that a
change in accounting estimate is an adjustment of the carrying amount of an asset or
liability, or related expense, resulting from reassessing the expected future benefits and
obligations associated with that asset or liability.
Lease implicit rate formula : PV of future lease payments = Annual Payments x Cumulative
Discount Factor (CDF). This CDF will help to find the rate using the table.
IAS 19 : If the pension is paid or contribution is made at the start of the year, this should be
adjusted to the opening balances of PV of Liability & FV of Plan Asset to calculate the
interest on them.
Current tax is based on taxable profit for the year. Taxable profit is different from accounting
profit due to temporary differences between accounting and tax treatments, and due to
items which are never taxable or tax deductible. Tax benefits such as tax credits are not
recognised unless it is probable that the tax positions are sustainable.
Provision for deferred tax is made for temporary differences between the carrying amount
of assets and liabilities for financial reporting purposes and their value for tax purposes. The
amount of deferred tax reflects the expected recoverable amount and is based on the
expected manner of recovery or settlement of the carrying amount of assets and liabilities,
using the basis of taxation enacted or substantively enacted by the financial statement date.
Deferred tax assets are not recognised where it is more likely than not that the assets will
not be realised in the future and reference to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets is useful in this regard. The evaluation of deferred tax assets’
recoverability requires judgements to be made regarding the availability of future taxable
income.
IAS 19 : The remeasurement component is taken to other comprehensive income and
comprises:
– Actuarial gains and losses, such as the return on plan assets which differs from the expected
return on the assets included within the net interest figure;
– Changes in the asset ceiling not included within the net interest calculation.
IAS 19 Employee Benefits requires settlement payments to be recognised at the earlier of
when the plan of termination is announced and when the entity recognises the associated
restructuring costs associated with the closure of the firm.
When the properties held under operating lease are sold, the proceeds are included under
operating cash flows.
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Under IFRS 5, a subsequent increase in fair value less costs to sell may be recognised in
profit or loss only to the extent of any impairment previously recognised.
IAS 12 Income Taxes requires that deferred tax liabilities must be recognised for all taxable
temporary differences. Deferred tax assets should be recognised for deductible temporary
differences but only to the extent that taxable profits will be available against which the
deductible temporary differences may be utilised.
Deferred taxes represent the amounts of income taxes payable or recoverable in future
periods in respect of temporary differences. Temporary differences are differences between
the carrying amount of an asset or liability and its tax base. A deferred tax asset arises where
the tax base of an asset exceeds the carrying amount. A deferred tax asset can also occur
when the tax base of a liability differs from its carrying amount; the eventual settlement of the
liability represents a future tax deduction. In relation to unused trading losses, the carrying
amount is zero since the losses have not yet been recognised in the financial statements of
Hudson. A potential deferred tax asset does arise but the determination of the tax base is
more problematic. The tax base of an asset is the amount which will be deductible against
taxable economic benefits from recovering the carrying amount of the asset. Where recovery
of an asset will have no tax consequences, the tax base is equal to the carrying amount.
IFRS 9 Financial Instruments states that ‘any embedded derivative included in a contract for
the sale or purchase of a non-financial item that is denominated in a foreign currency shall be
separated when its economic characteristics and risks are not closely related to those of the
host contract’. Thus, in contrast to the treatment for hybrid contracts with financial asset
hosts, derivatives embedded with a financial liability will often be separately accounted for.
That is, they must be separated if they are not closely related to the host contract, they meet
the definition of a derivative, and the hybrid contract is not measured at fair value through
profit or loss (FVTPL).
IFRS 15 Revenue from Contracts with Customers requires that non-cash consideration
received should be measured at the fair value of the consideration received. If fair value
cannot be reasonably estimated, the consideration should be measured by reference to the
stand-alone selling price of the good or service promised in the contract. The fair value of
non-cash consideration may vary. If the non-cash consideration varies for reasons other than
the form of the consideration, entities will apply the guidance in IFRS 15 related to
constraining variable consideration. However, if fair value varies only due to the form, the
variable constraint guidance in IFRS 15 would not apply.
The return on equity (ROE) ratio measures the rate of return which the owners of issued
shares of a company receive on their shareholdings in terms of profitability. ROE signifies
how good the company is in generating profit on the investment it receives from its
shareholders. This metric is especially important from an investor’s perspective, as it can be
used to judge how efficiently the firm will be able to use shareholder’s investment to
generate additional revenues.
How to find the value of NCI in full goodwill method when no information is given about it ?
Answer : Find the carrying value of net asset of subsidiary and add goodwill to it. Then
multiply this amount with the NCI’s share.
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The net profit margin (net profit/sales) tells how much profit a company makes on every
dollar of sales. Asset turnover (sales/assets) ratio measures the value of a company’s sales
or revenues generated relative to the carrying amount of its assets. The asset turnover ratio
can often be used as an indicator of the efficiency with which a company is deploying its
assets in generating revenue. The equity ratio indicates the relative proportion that equity is
used to finance a company’s assets. The equity ratio is a good indicator of the level of
leverage used by a company by measuring the proportion of the total assets which are
financed by shareholders, as opposed to creditors.
A sale and leaseback transaction occurs where an entity transfers an asset to another
entity and leases that asset back from the buyer/lessor. The first required criteria of IFRS
standards is to determine whether a sale has occurred. Under IFRS 16, an entity must apply
the IFRS 15 Revenue from Contracts with Customers requirements to determine when a
performance obligation is satisfied. If it is concluded that the transfer of an asset is not a
sale, then the seller/lessee will continue to recognise the transferred asset. In this event, a
financial liability and financial asset will be recognised under IFRS 9 Financial Instruments.
The entity should follow IFRS 15 to account for the sale and then apply IFRS 16 to account
for the lease. Thus, the entity should account for the sale and leaseback as follows:
- Derecognise the underlying asset
- Recognise the sale at fair value
- Recognise only the gain/loss which relates to the rights transferred to buyer/lessor.
- Recognise a right-of-use asset as a proportion of the previous carrying amount of the
underlying asset
- Recognise a lease liability.
IFRS 10 states that an investor controls an investee if and only if it has all of the following;
• Power over the investee
• Exposure or rights to variable returns from its investment with the investee
• The ability to use its power over the investee to affect the amount of the investor’s returns.
IFRS 10 Consolidated Financial Statements views the partial disposal of a subsidiary, in
which control is retained by the parent company, as an equity transaction accounted for
directly in equity. The accounting treatment is driven by the concept of substance over form.
In substance, there has been no disposal because the entity is still a subsidiary, so no profit
on disposal should be recognised and there is no effect on the consolidated statement of
profit or loss and other comprehensive income. The transaction is, in effect, a transfer
between the owners of Parent and the non-controlling interests.
IFRS 3 gives a definition of a business, which needs to be applied in determining whether a
transaction is a business combination:
'An integrated set of activities and assets that is capable of being conducted and managed for
the purpose of providing a return in the form of dividends, lower costs or other economic
benefits directly to investors or other owners, members or participants.'
Materiality needs to be taken into account when making disclosures. Practice Statement 2
Making Materiality Judgements confirms that disclosure does not need to be made, even
when prescribed by an IFRS, if the resulting information presented is not material.
Service cost is a non-cash item because it is the change in the PV of liability due to change
in the number of employees.
Benefits paid out of the scheme will have nil affect on operating cash flows it is removed
from the asset and then paid out.
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Related parties A person or a close member of that person's family is a related party of a
reporting entity if that person:
I. Has control or joint control over the reporting entity;
II. Has significant influence over the reporting entity; or
III. Is a member of the key management personnel of the reporting entity or of a parent of the
reporting entity.
An instrument may be classified as an equity instrument if it contains a contingent
settlement provision requiring settlement in cash or a variable number of the entity's own
shares only on the occurrence of an event which is very unlikely to occur – such a provision
is not considered to be genuine. If the contingent payment condition is beyond the control of
both the entity and the holder of the instrument, then the instrument is classified as a
financial liability.
A contract resulting in the receipt or delivery of an entity's own shares is not automatically an
equity instrument. The classification depends on the so- called 'fixed test' in IAS 32. A
contract which will be settled by the entity receiving or delivering a fixed number of its own
equity instruments in exchange for a fixed amount of cash is an equity instrument. In
contrast, if the amount of cash or own equity shares to be delivered or received is variable,
then the contract is a financial liability or asset.
IFRS 8 Operating Segments describes an operating segment as a component of an entity:
1. Which engages in business activities from which it may earn revenues and incur expenses;
2. Whose operating results are regularly reviewed by the entity's chief operating decisionmaker to make decisions about resources to be allocated to the segment and assess its
performance;
3. For which discrete financial information is available.
Entity could improve the usefulness of underlying EPS by:
• Including an appropriate description of how the measure is calculated
• Ensuring that the calculation of underlying EPS is consistent year on year and that
comparatives are presented
• Explaining the reasons for presenting the measure, why it is useful for investors and for what
purpose management may use it
• Presenting a reconciliation to the most directly reconcilable measure in the financial
statements, for example EPS calculated in accordance with IAS 33
• Not excluding items from underlying EPS that could legitimately reoccur in the future, such
as impairment losses on goodwill
The reduction in the net pension liability as a result of the employees being made redundant
and no longer accruing pension benefits is a curtailment under IAS 19 Employee Benefits.
IAS 19 defines a curtailment as occurring when an entity significantly reduces the number of
employees covered by a plan. It is treated as a type of past service costs. The past service
cost may be negative when the benefits are withdrawn so that the present value of the
defined benefit obligation decreases.
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IAS 19 requires the past service cost to be recognised in profit or loss at the earlier of:
- When the plan curtailment occurs; and
- When the entity recognises the related restructuring costs.
IAS 19 was amended in 2018 to clarify that when a net defined benefit liability is
remeasured as a result of a curtailment (or plan amendment or settlement), updated actuarial
assumptions should be used to determine current service cost and net interest for the
remainder of the reporting period.
Prior to the amendment, the accounting was not clear as IAS 19 implied that entities should
not update the actuarial assumptions for the calculation of current service cost and net
interest during the period, even if a plan amendment, curtailment or settlement had resulted
in remeasurement of the net defined benefit liability. The IASB believes that by amending IAS
19 to require updated assumptions to be used, the resulting information will be more useful
to users of accounts.
Value in use is the discounted present value of estimated future cash flows expected to
arise from the continuing use of an asset and from its disposal at the end of its useful life.
IFRS 8 does not prescribe a basis on which to allocate common costs, but it does require
that that basis should be reasonable.
IFRS 8 Operating Segments requires operating segments to be reported separately if they
exceed at least one of certain qualitative thresholds. Two or more operating segments below
the thresholds may be aggregated to produce a reportable segment if the segments have
similar economic characteristics, and the segments are similar in a majority of the following
aggregation criteria:
- The nature of the products and services
- The nature of the production process
- The type or class of customer for their products or services
- The methods used to distribute their products or provide their services
- If applicable, the nature of the regulatory environment
The incremental borrowing rate should be used to discount the revenue (IFRS 15) to be
received over the period to present value terms and to find the financing component.
Examples of use of fair values in IFRS include:
- IAS 16 Property, Plant and Equipment allows revaluation through other comprehensive
income, provided it is carried out regularly.
- While IAS 40 Investment Property allows the option of measuring investment properties at
fair value with corresponding changes in profit or loss, and this arguably reflects the
business model of some property companies, many companies still use historical cost.
- IAS 38 Intangible Assets permits the measurement of intangible assets at fair value with
corresponding changes in equity, but only if the assets can be measured reliably through the
existence of an active market for them.
- IFRS 9 Financial Instruments requires some financial assets and liabilities to be measured at
amortised cost and others at fair value. The measurement basis is largely determined by the
business model for that financial instrument. For financial instruments measured at fair value,
depending on the category and the circumstances, gains or losses are recognised either in
profit or loss or in other comprehensive income.
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Shortcomings of IAS 37
IAS 37 is generally consistent with the Conceptual Framework. However there are some issues
with IAS 37 that have led to it being criticised:
(i) IAS 37 requires recognition of a liability only if it is probable, that is more than 50% likely,
that the obligation will result in an outflow of resources from the entity. This is inconsistent
with other standards, for example IFRS 3 Business Combinations and IFRS 9 Financial
Instruments which do not apply the probability criterion to liabilities. In addition, probability
is not part of the Conceptual Framework definition of a liability nor part of the Conceptual
Framework's recognition criteria.
(ii) There is inconsistency with US GAAP as regards how they treat the cost of restructuring
a business. US GAAP requires entities to recognise a liability for individual costs of
restructuring only when the entity has incurred that particular cost, while IAS 37 requires
recognition of the total costs of restructuring when the entity announces or starts to
implement a restructuring plan.
(iii) The measurement rules in IAS 37 are vague and unclear. In particular, 'best estimate'
could mean a number of things: the most likely outcome, the weighted average of all
possible outcomes or even the minimum/maximum amount in a range of possible
outcomes. IAS 37 does not clarify which costs need to be included in the measurement of
a liability, and in practice different entities include different costs. It is also unclear if 'settle'
means 'cancel', 'transfer' or 'fulfil' the obligation. IAS 37 also requires provisions to be
discounted to present value but gives no guidance on non-performance risk that is the
entity's own credit risk. Non-performance risk can have a lead to a significant reduction in
non-current liabilities.
IAS 36 requires that the discount rate should appropriately reflect the current market
assessment of the time value of money and the risks specific to the asset or cash-generating
unit.
Hot topic for the examiners :
Accoun&ng for cryptocurrencies
There are many issues that accountants may encounter in prac1ce for which no accoun1ng standard
currently exists; one example is cryptocurrencies. For example, as no accoun1ng standard currently
exists to explain how cryptocurrency should be accounted for, accountants have no alterna1ve but to
refer to exis1ng accoun1ng standards. This ar1cle demonstrates to Strategic Business Repor1ng (SBR)
candidates how this can be done using cryptocurrencies as an example.
In any exam situa1on, it is expected that candidates will take a few minutes to reflect on each ques1on/
scenario and plan their answer – ie in this case, think about what accoun1ng standards might be
applicable. This plan will then provide a structure for your answer. SBR candidates should note that it is
perfectly acceptable to suggest a reasonable accoun1ng standard and then explain why that standard is
not applicable; indeed, this ar1cle adopts a similar approach with Interna1onal Accoun1ng Standard
(IAS®) 7, Statement of Cash Flows, IAS 32, Financial Instruments: Presenta7on and Interna1onal Financial
Repor1ng Standard (IFRS®) 9, Financial Instruments
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What is cryptocurrency?
Cryptocurrency is an intangible digital token that is recorded using a distributed ledger infrastructure,
oPen referred to as a blockchain. These tokens provide various rights of use. For example,
cryptocurrency is designed as a medium of exchange. Other digital tokens provide rights to the use other
assets or services, or can represent ownership interests.
These tokens are owned by an en1ty that owns the key that lets it create a new entry in the ledger.
Access to the ledger allows the re-assignment of the ownership of the token. These tokens are not
stored on an en1ty’s IT system as the en1ty only stores the keys to the Blockchain (as opposed to the
token itself). They represent specific amounts of digital resources which the en1ty has the right to
control, and whose control can be reassigned to third par1es.
What accoun&ng standards might be used to account for cryptocurrency?
At first, it might appear that cryptocurrency should be accounted for as cash because it is a form of
digital money. However, cryptocurrencies cannot be considered equivalent to cash (currency) as defined
in IAS 7 and IAS 32 because they cannot readily be exchanged for any good or service. Although an
increasing number of en11es are accep1ng digital currencies as payment, digital currencies are not yet
widely accepted as a medium of exchange and do not represent legal tender. En11es may choose to
accept digital currencies as a form of payment, but there is no requirement to do so.
IAS 7 defines cash equivalents as ‘short-term, highly liquid investments that are readily conver1ble to
known amounts of cash and which are subject to an insignificant risk of changes in value’. Thus,
cryptocurrencies cannot be classified as cash equivalents because they are subject to significant price
vola1lity. Therefore, it does not appear that digital currencies represent cash or cash equivalents that
can be accounted for in accordance with IAS 7.
Intui1vely, it might appear that cryptocurrency should be accounted for as a financial asset at fair value
through profit or loss (FVTPL) in accordance with IFRS 9. However, it does not seem to meet the
defini1on of a financial instrument either because it does not represent cash, an equity interest in an
en1ty, or a contract establishing a right or obliga1on to deliver or receive cash or another financial
instrument. Cryptocurrency is not a debt security, nor an equity security (although a digital asset could
be in the form of an equity security) because it does not represent an ownership interest in an en1ty.
Therefore, it appears cryptocurrency should not be accounted for as a financial asset.
However, digital currencies do appear to meet the defini1on of an intangible asset in accordance with
IAS 38, Intangible Assets. This standard defines an intangible asset as an iden1fiable non-monetary asset
without physical substance. IAS 38 states that an asset is iden1fiable if it is separable or arises from
contractual or other legal rights. An asset is separable if it is capable of being separated or divided from
the en1ty and sold, transferred, licensed, rented or exchanged, either individually or together with a
related contract, iden1fiable asset or liability. This also corresponds with IAS 21, The Effects of Changes
in Foreign Exchange Rates, which states that an essen1al feature of a non-monetary asset is the absence
of a right to receive (or an obliga1on to deliver) a fixed or determinable number of units of currency.
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Thus, it appears that cryptocurrency meets the defini1on of an intangible asset in IAS 38 as it is capable
of being separated from the holder and sold or transferred individually and, in accordance with IAS 21, it
does not give the holder a right to receive a fixed or determinable number of units of currency.
Cryptocurrency holdings can be traded on an exchange and therefore, there is an expecta1on that the
en1ty will receive an inflow of economic benefits. However, cryptocurrency is subject to major varia1ons
in value and therefore it is non-monetary in nature. Cryptocurrencies are a form of digital money and do
not have physical substance. Therefore, the most appropriate classifica1on is as an intangible asset.
IAS 38 allows intangible assets to be measured at cost or revalua1on. Using the cost model, intangible
assets are measured at cost on ini1al recogni1on and are subsequently measured at cost less
accumulated amor1sa1on and impairment losses. Using the revalua1on model, intangible assets can be
carried at a revalued amount if there is an ac1ve market for them; however, this may not be the case for
all cryptocurrencies. The same measurement model should be used for all assets in a par1cular asset
class. If there are assets for which there is not an ac1ve market in a class of assets measured using the
revalua1on model, then these assets should be measured using the cost model.
IAS 38 states that a revalua1on increase should be recognised in other comprehensive income and
accumulated in equity. However, a revalua1on increase should be recognised in profit or loss to the
extent that it reverses a revalua1on decrease of the same asset that was previously recognised in profit
or loss. A revalua1on loss should be recognised in profit or loss. However, the decrease shall be
recognised in other comprehensive income to the extent of any credit balance in the revalua1on surplus
in respect of that asset. It is unusual for intangible assets to have ac1ve markets. However,
cryptocurrencies are oPen traded on an exchange and therefore it may be possible to apply the
revalua1on model.
Where the revalua1on model can be applied, IFRS 13, Fair Value Measurement, should be used to
determine the fair value of the cryptocurrency. IFRS 13 defines an ac1ve market, and judgement should
be applied to determine whether an ac1ve market exists for par1cular cryptocurrencies. As there is daily
trading of Bitcoin, it is easy to demonstrate that such a market exists. A quoted market price in an ac1ve
market provides the most reliable evidence of fair value and is used without adjustment to measure fair
value whenever available. In addi1on, the en1ty should determine the principal or most advantageous
market for the cryptocurrencies.
An en1ty will also need to assess whether the cryptocurrency’s useful life is finite or indefinite. An
indefinite useful life is where there is no foreseeable limit to the period over which the asset is expected
to generate net cash inflows for the en1ty. It appears that cryptocurrencies should be considered as
having an indefinite life for the purposes of IAS 38. An intangible asset with an indefinite useful life is not
amor1sed but must be tested annually for impairment.
In certain circumstances, and depending on an en1ty’s business model, it might be appropriate to
account for cryptocurrencies in accordance with IAS 2, Inventories, because IAS 2 applies to inventories
of intangible assets. IAS 2 defines inventories as assets:
held for sale in the ordinary course of business
•
in the process of produc1on for such sale, or
•
in the form of materials or supplies to be consumed in the produc1on process or in the
•
rendering of services.
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For example, an en1ty may hold cryptocurrencies for sale in the ordinary course of business and, if that
is the case, then cryptocurrency could be treated as inventory. Normally, this would mean the
recogni1on of inventories at the lower of cost and net realisable value. However, if the en1ty acts as a
broker-trader of cryptocurrencies, then IAS 2 states that their inventories should be valued at fair value
less costs to sell. This type of inventory is principally acquired with the purpose of selling in the near
future and genera1ng a profit from fluctua1ons in price or broker-traders’ margin. Thus, this
measurement method could only be applied in very narrow circumstances where the business model is
to sell cryptocurrency in the near future with the purpose of genera1ng a profit from fluctua1ons in
price.
As there is so much judgement and uncertainty involved in the recogni1on and measurement of
cryptocurrencies, a certain amount of disclosure is required to inform users in their economic decisionmaking. IAS 1, Presenta7on of Financial Statements, requires an en1ty to disclose judgements that its
management has made regarding its accoun1ng for holdings of assets, in this case cryptocurrencies, if
those are part of the judgements that had the most significant effect on the amounts recognised in the
financial statements. Also IAS 10, Events aEer the Repor7ng Period requires an en1ty to disclose any
material non-adjus1ng events. This would include whether changes in the fair value of cryptocurrency
aPer the repor1ng period are of such significance that non-disclosure could influence the economic
decisions that users of financial statements make on the basis of the financial statements.
So, accoun1ng for cryptocurrencies is not as simple as it might first appear. As no IFRS standard currently
exists, reference must be made to exis1ng accoun1ng standards (and perhaps even the Conceptual
Framework of Financial Repor1ng). SBR candidates should be prepared to adopt this approach in an
exam situa1on because it allows them to substan1ate their conclusion which is an approach that will be
expected by employers in prac1ce.
Wri8en by a member of the Strategic Business Repor1ng examining team
Cash and cash equivalents comprise cash in hand and demand deposits, together with short-term,
liquid investments which are readily conver1ble to a known amount of cash and which are subject to
an insignificant risk of changes in value
The tax base of an asset is the tax deduc&on which will be available in future when the asset
generates taxable economic benefits, which will flow to the en1ty when the asset is recovered. If the
future economic benefits will not be taxable, the tax base of an asset is its carrying amount.
The tax base of a liability is its carrying amount, less the tax deduc1on which will be available when
the liability is sedled in future periods. For revenue received in advance (or deferred income), the tax
base is its carrying amount, less any amount of the revenue which will not be taxable in future
periods.
A taxable temporary difference arises when the carrying amount of an asset exceeds its tax base or
the carrying amount of a liability is less than its tax base. All taxable temporary differences give rise to
a deferred tax liability.
A deduc&ble temporary difference arises in the reverse circumstance (when the carrying amount of
an asset is less than its tax base or the carrying amount of a liability is greater than its tax base). All
deduc1ble temporary differences give rise to a deferred tax asset.
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