Reference no: EM131340864
Difir Inc owns the following property, plant and equipment at 1 January 2004 (amounts in thousands of euro):
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Cost
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Accumulated Depreciation
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Carrying Value
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Tax Base
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Machinery
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900
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180
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720
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450
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Land
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500
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-
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500
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-
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Buildings
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1,500
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300
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1,200
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-
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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.
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