Accounting · Deferred Tax (IAS 12)
Which statement best reflects the accounting treatment that a company must apply when it adopts the revaluation model under IAS 16, assuming the fair value of the property exceeds its carrying amount?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The revaluation model is applied retrospectively, and deferred tax is adjusted directly against retained earnings at the beginning of the period.
- 2The revaluation surplus is recognized in profit or loss, and there is no deferred tax effect.
- 3The revaluation surplus gives rise to a taxable temporary difference, and the related deferred tax is recognized in other comprehensive income.✓
- 4The revaluation surplus is recognized in other comprehensive income, and the related deferred tax income is recognized in profit or loss.
Correct answer
The revaluation surplus gives rise to a taxable temporary difference, and the related deferred tax is recognized in other comprehensive income.
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