Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p46
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 46/61)
Character Range: 154191–157307

in B's jurisdiction is nil. However, in accordance with paragraph 15(a) of the Standard, A recognises no deferred tax liability for the taxable temporary difference associated with the goodwill in B's tax jurisdiction.
The carrying amount, in A's consolidated financial statements, of its investment in B is made up as follows:
Fair value of identifiable assets acquired and liabilities assumed, excluding deferred tax  504
Deferred tax liability (135 at 40%)                                                         (54)
Fair value of identifiable assets acquired and liabilities assumed                          450
Goodwill                                                                                    150
Carrying amount                                                                             600

Because, at the acquisition date, the tax base in A's tax jurisdiction, of A's investment in B is 600, no temporary difference is associated in A's tax jurisdiction with the investment.
During X5, B's equity (incorporating the fair value adjustments made as a result of the business combination) changed as follows:
At 1 January X5                                                          450
Retained profit for X5 (net profit of 150, less dividend payable of 80)  70
At 31 December X5                                                        520

A recognises a liability for any withholding tax or other taxes that it will incur on the accrued dividend receivable of 80.
At 31 December X5, the carrying amount of A's underlying investment in B, excluding the accrued dividend receivable, is as follows:
Net assets of B  520
Goodwill         150
Carrying amount  670

The temporary difference associated with A's underlying investment is 70. This amount is equal to the cumulative retained profit since the acquisition date.
If A has determined that it will not sell the investment in the foreseeable future and that B will not distribute its retained profits in the foreseeable future, no deferred tax liability is recognised in relation to A's investment in B (see paragraphs 39 and 40 of the Standard). Note that this exception would apply for an investment in an associate only if there is an agreement requiring that the profits of the associate will not be distributed in the foreseeable future (see paragraph 42 of the Standard). A discloses the amount of the temporary difference for which no deferred tax is recognised, ie 70 (see paragraph 81(f) of the Standard).
If A expects to sell the investment in B, or that B will distribute its retained profits in the foreseeable future, A recognises a deferred tax liability to the extent that the temporary difference is expected to reverse. The tax rate reflects the manner in which A expects to recover the carrying amount of its investment (see paragraph 51 of the Standard). A recognises the deferred tax in other comprehensive income to the extent that the deferred tax results from foreign exchange translation differences that have been recognised in other comprehensive income (paragraph 61A of the Standard). A discloses separately:
(a) the