If the carrying amount of an asset of a subsidiary in a business combination is increased to fair value,on consolidation the group will record:
A) a deferred tax liability.
B) a deferred tax asset.
C) a gain on bargain purchase.
D) none of the above.

Question

Quizplus · Accepted Answer

When the carrying amount of an asset is increased to its fair value, it typically results in a temporary difference between the asset's tax base and its carrying amount in the financial statements. This difference usually leads to a deferred tax liability, as the future tax base of the asset will be lower than its carrying amount, implying that more tax will be payable in the future when the asset is recovered.

If the Carrying Amount of an Asset of a Subsidiary