The directors of Hillbeck Ltd wish to recognise a deferred tax asset in relation to 250$250$ million of unused

trading losses which have accumulated as at 31$31$ December 2022.$2022.$ Hillbeck Ltd has budgeted profits for

80$80$ million for the year ended 31$31$ December 2023.$2023.$ The directors have forecast that profits will grow by

20%$20\%$ each year for the next four years.

The market is currently depressed, and sales orders are at a lower level for the first quarter of 2023$2023$

than they were for the same period in any of the previous five years. Hillbeck Ltd operates under a tax

jurisdiction which allows for trading losses to be only carried forward for a maximum of two years.

Required

Explain whether a deferred tax asset can be recognised in the financial statements of Hillbeck Ltd in 

the year ended 31$31$ December 2022.$2022.$

Answer rating: 100% (QA)

The recognition of a deferred tax asset in the financial statements depends on several factors with the main one being whether its probable that enoug... View the full answer