If an impairment loss is recognised against an asset that has previously been revalued up to fair value,the impairment journal entry must include a reduction of the previously recorded:
A)deferred tax asset.
B)deferred tax liability.
C)income tax payable.
D)income tax expense.

Question

Quizplus · Accepted Answer

When an asset is revalued up to fair value, it creates a deferred tax liability as the tax base of the asset increases. If an impairment loss is then recognised, the previously recorded deferred tax liability needs to be reduced accordingly in the journal entry. Therefore, the correct choice is B, deferred tax liability.

If an Impairment Loss Is Recognised Against an Asset That