'Intra-group transactions will never give rise to tax-effect assets or liabilities'

Question

Quizplus · Accepted Answer

Intra-group transactions may give rise to tax-effect assets or liabilities if there are differences in group and subsidiary balances, as some transactions may affect the tax base of assets or liabilities differently at the group level than at the subsidiary level. While AASB 112 excludes intra-group transactions from its scope, it does not preclude the possibility of tax-effect assets or liabilities arising from such transactions, as exemplified by the fact that the standard allows the recognition of DTLs and DTAs from inventory transactions. The statement in option A is partially correct, but it does not provide a complete answer as it overlooks the possibility of balance differences. Option B is incorrect as intra-group transactions may result in either CA > CA or CA < CA. Option D is incorrect as the fact that AASB 112 recognizes DTLs and DTAs arising from inventory transactions does not nullify the possibility of intra-group transactions giving rise to such tax effects.

'Intra-Group Transactions Will Never Give Rise to Tax-Effect Assets or Liabilities