Asked by Callie Idell on May 17, 2024
Verified
Discuss the basis of recognition of tax effects relating to accrued revenue and expenses for such intragroup items as management fees and interest.
Tax Effects
Tax effects are the impact of tax laws and policies on an individual's or company's financial situation, including how taxes influence investment returns, net income, and economic decisions.
Accrued Revenue
Revenue that has been earned but not yet received in cash or recorded by the accounting system.
Management Fees
Fees paid to managers for operating investment funds or managing assets.
- Describe the basis for recognizing tax effects relating to intragroup items.
Verified Answer
HS
Holly StreamerMay 20, 2024
Final Answer :
Tax effects relating to accrued revenue and expenses:
- Accruals of revenue and expense for intragroup service fees and interest do not give rise to tax effects.
- Accrued service fees payable and receivable have a tax base equal to the carrying amount and there are no tax implications.
- In relation to accrued interest on intragroup loans,there is a deferred tax effect because accounting accruals of interest receivable and payable create deferred tax liabilities and assets respectively.
- It is unlikely that the deferred tax assets and liabilities can be offset as a group does not meet the offset requirements of AASB 112.
- Accruals of revenue and expense for intragroup service fees and interest do not give rise to tax effects.
- Accrued service fees payable and receivable have a tax base equal to the carrying amount and there are no tax implications.
- In relation to accrued interest on intragroup loans,there is a deferred tax effect because accounting accruals of interest receivable and payable create deferred tax liabilities and assets respectively.
- It is unlikely that the deferred tax assets and liabilities can be offset as a group does not meet the offset requirements of AASB 112.
Learning Objectives
- Describe the basis for recognizing tax effects relating to intragroup items.