Determine the deferred tax balance for 2004 and 2005

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Reference no: EM131340864

Difir Inc owns the following property, plant and equipment at 1 January 2004 (amounts in thousands of euro):

	Cost	Accumulated Depreciation	Carrying Value	Tax Base
Machinery	900	180	720	450
Land	500	-	500	-
Buildings	1,500	300	1,200	-

You are provided with further information in order to determine the deferred tax balance for 2004 and 2005:

• Machinery is depreciated on the straight-line basis over five years. It was acquired at the beginning of 2003.

• Land is not depreciated.

• Buildings are depreciated on the straight-line basis over 25 years.

• Depreciation of office buildings is not deductible for tax purposes. For machinery, tax depreciation is granted over a period of three years in the ratio of 50/30/20 (per cent) of cost, consecutively.

• The accounting profit before tax was EUR 300,000 for the 2004 financial year and EUR 400,000 for 2005. These figures include non-taxable revenue of EUR 80,000 in 2004 and EUR 100,000 in 2005.

• Difir Inc had a tax loss for the financial year ended 31 December 2003 of EUR 250,000.

• The tax rate for 2003 was 35 per cent, and for 2004 and 2005 it was 30 per cent.

Reference no: EM131340864

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