The depreciation charge measures the extent of that

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making inventories for sale to external entities. The depreciation charge measures the extent of that involvement in any one year as the depreciation charge is based on para 60 of AASB 116 which notes that the depreciation charge reflects the pattern of benefits consumed by the entity. Realisation of profit then occurs as the asset is used up or consumed by the entity. Realisation is then in proportion to the depreciation charge made on the asset. 11. When is profit realised on an intragroup transaction involving the parent renting a warehouse from the subsidiary? With such a transaction, the subsidiary records revenue, which increases subsidiary profit. This profit is not recognised by the group. However, no adjustment is made to the NCI share of equity as a result of this transaction. This is because of the difficulty of determining a point of realisation as no external entity is ever involved in this transaction. 12. If a step approach is used in the calculation of the NCI share of equity, what are the steps involved? There are 3 steps: 1. Share of equity at acquisition date. 2. Share of change in equity between the acquisition date and the beginning of the current period. 3. Share of change in equity in the current period. 13. What are two events that could occur between the acquisition date and the beginning of the current period that could affect the calculation of the NCI share of retained earnings? Changes in the assets & liabilities recognised via the BCVR entries eg sale of the inventory on hand in the subsidiary at the acquisition date. Movements in equity eg transfers to/from general reserve, prior period dividends 14. For what line items in the financial statements is it necessary to provide a break-down into parent entity share and NCI share? Statement of Profit or Loss and Other Comprehensive Income: AASB 101 para 83: Disclose both NCI and parent share of profit/loss for the period AND share of total comprehensive income for the period Statement of Financial Position: AASB 101 para 54 (q) and (r): NCI share of equity, and share capital and reserves attributable to parent Statement of Changes in Equity: AASB 101 para 106 (a): total comprehensive income for the period, showing that attributable to the parent and that attributable to the NCI.
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Income Tax: 1. Explain why income tax expense is usually not equal to accounting profit multiplied by the corporate tax rate. Your answer should refer to the main principles of accounting for income tax. In accrual accounting, an expense that arises from the recognition of a liability must be measured by reference to what the expected cash flow will be on settlement of the liability. Rent expense that arises from rent payable is ultimately paid in cash. Similarly, income tax expense should reflect income taxes to be paid in cash whether for the current period or in a future period. Prima facie income tax calculated as accounting profit multiplied by the corporate tax rate does not connect with the income tax that a company expects to pay because income tax is levied on taxable profit not accounting profit.
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