Discuss the requirements for recognising deferred tax assets

Assignment Help Accounting Basics

Reference no: EM132703240

Question - Homer has a reporting date of 30 September 2020 and prepares its financial statements in accordance with International Financial Reporting Standards.

Homer has a majority holding in Offshore, which operates in a foreign country that is suffering an economic recession, with high inflation and a falling exchange rate. The value of the functional currency of Offshore fell by more than 54% in the current financial year, compared to Homer's functional currency, the dollar.

Offshore had been constructing a head office building, but has temporarily ceased work because of the difficult economic conditions. Homer is negotiating to sell the development on behalf of Offshore and expects to achieve a significant gain on sale. A gain would be taxed as a capital gain in the foreign jurisdiction.

Offshore has negative equity and reported operating losses in the latest three years, including the current year. Offshore recognised a deferred tax asset for the tax losses, which may be carried forward indefinitely under local tax rules. Tax losses from operations may only be offset against profits from operations. Offshore did not disclose information to support recognition of the deferred tax asset.

Required - Discuss the requirements for recognising deferred tax assets generally and advise on how to account for this case.

Reference no: EM132703240

Questions Cloud

How much cash was received for services provided : Unearned Revenues was P6,000 at the end of February and P7,500 at the end of March. How much cash was received for services provided during March

What capital cost is assigned to the new building : Permits on the construction of this new facility totalled $18,000. What capital cost is assigned to the new building

What the amount of gross margin from the four transactions : What the amount of gross margin from the four transactions is?The company returned $2,000 of merchandise to the supplier before payment was made.

Does your company use cloud computing : Does your company use cloud computing? If not, why not. How did your company justify the cost of these services?

Discuss the requirements for recognising deferred tax assets : Discuss the requirements for recognising deferred tax assets generally and advise on how to account for this case

Determine what the adjusted cash balance should be : Determine what the adjusted cash balance should be? Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments

Explain the use of flasher box : Explain the use of a Flasher Box. Explain the important points in evaluating dates and times on a device?

How much is lexington depreciation recapture potential : How much ordinary income does Ambroz recognize when he sells this partnership interest? How much is Lexington's depreciation recapture potential?

Numerous databases that contain personal : There are numerous databases that contain personal, but public, information about individuals.

User Account

All Pages