The fact that consolidation worksheets start 'afresh' each year means that the tax entry for eliminating unrealised profit in opening inventory requires a 'Dr' to deferred tax assets,rather than income tax expense.

Question

Quizplus · Accepted Answer

The elimination of unrealized profit in opening inventory affects the income tax expense directly because it alters the taxable income for the year. Deferred tax assets or liabilities would be adjusted if there were temporary differences between the carrying amount of assets or liabilities in the balance sheet and their tax bases, but the primary adjustment for unrealized profit elimination is to the income tax expense to reflect the correct taxable income.

The Fact That Consolidation Worksheets Start 'Afresh' Each Year Means