CERTYNEX IFRS ACADEMY

Aubrisse buys an office building separately, outside any business combination, for 700,000; under the tax law (data), 200,000 of this cost will never be deductible, either through depreciation or on disposal. The purchase affects no profit. The accountant recognises a deferred tax liability of 50,000 (25% rate) as an expense. Where is the error?

All three conditions of the exception are met: no deferred tax liability is recognised.

The liability was justified, but it should have been added to the cost of the building instead of being expensed.

The liability should have been computed on 700,000.

A deferred tax asset of 50,000 was needed.