ACCA FR · Chapter 9 · Question 6 of 8
Which of the following would normally give rise to a deferred tax ASSET?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A warranty provision whose costs are deductible for tax only when the repairs are paid for
Explanation
A provision whose cost is deductible only when paid has a tax base of nil. The carrying amount of the liability is higher than its tax base, which is a deductible temporary difference and gives a deferred tax asset. Accelerated tax allowances and revaluations create deferred tax liabilities. A non-deductible fine is a permanent difference.
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