Isa Ltd is a gold exploration company. Isa Ltd has recognised a deferred tax asset balance for tax losses in its statement of financial position for each of the past four years as follows:

At 30 June 2017, Isa Ltd is in financial distress due to a cash shortage and bank restrictions on providing any further funds.

The auditors of Isa Ltd have asked for your advice on whether a deferred tax asset should be recognised for carried forward tax losses at 30 June 2017. Discuss with reference to AASB 112.

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2014 Deferred tax asset 24 200 Isa Ltd ($000s) 2015 2016 133 200 197 000 2017 300 800 2014 Deferred tax asset 24 200 Isa Ltd ($000s) 2015 2016 133 200 197 000 2017 300 800

Answer rating: 100% (QA)

Isa Ltd is in financial distress at 30 June 2017 and the recognition of tax losses is inappropriate in these circumstances because it is not probable ... View the full answer