An analysis of Food Limited and McBurger Limited’s annual financial statements revealed the following balances for the deferred tax assets 

(DTAs).  30/6/17 30/6/18 30/6/19 

Food Limited $140,000 $142,000 $190,000 

McBurger Limited $58,000 $42,000 $18,000 

In the case of Food Limited, 100% of the DTAs for the year ending 2017 and 2018 were from tax losses and for 2019, 30% were from provision for annual leave and the remaining was from tax losses. McBurger Limited’s DTAs were a result of previous tax losses.

Required: 

Comment on the application of the DTAs criteria on the two companies above. Should the companies continue to recognise DTAs based on the given information? Justify your answer? 

Answer rating: 100% (QA)

it provides that deferred tax assets should only be recognized on unused tax losses or temporary dif... View the full answer