When performing the fair value adjustment process, which of the following is true?
A)The deferred income tax is reversed on the same basis as the fair value adjustment is written off
B)The deferred income tax recognized during the acquisition analysis always remains the same.
C)The fair value adjustments are initially recorded on the statement of financial position and are never written off
D)The fair value adjustments are initially recorded on the statement of financial position and are always written off through comprehensive income over a period of 5 years.

Question

Quizplus · Accepted Answer

During the fair value adjustment process, the deferred income tax is reversed on the same basis as the fair value adjustment is written off. This means that any changes in fair value will have a corresponding impact on deferred taxes, which need to be adjusted accordingly. Option B is incorrect because the deferred income tax recognized during the acquisition analysis may change as a result of fair value adjustments. Option C and D are incorrect because fair value adjustments may need to be reversed in future periods if the underlying assets or liabilities undergo further changes in fair value. Additionally, fair value adjustments are not always written off through comprehensive income over a period of 5 years, as this will depend on the nature of the asset or liability and how it is accounted for under accounting standards.

When Performing the Fair Value Adjustment Process, Which of the Following