- 8 Marks
CR – Nov 2014 – L3 – SC – Q4b – Income Taxes (IAS 12)
Evaluate the impact of deferred tax on fair value adjustments for property, plant, and equipment in an acquisition.
Question
On 1 June 2013, Bam Plc acquired Mango Limited for N3,150 million.
The fair value of the identifiable net assets of Mango Limited at this date was N825 million, and N2,550 million and retained earnings and other components of equity were N105 million, respectively. Mango Limited’s share capital was N1,500 million.
The excess of the fair value of the net assets is due to an increase in the value of property, plant, and equipment.
Required:
Evaluate the impact of full deferred tax on the excess of the fair value of the net assets attributable to the increase in the value of property, plant, and equipment of Bam Plc.
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