IASB Amends Income Tax, IFRS Adoption Rules

The International Accounting Standards Board (IASB) on Monday issued amendments to IAS 12, Income Taxes , and what it called “narrow amendments” to IFRS 1, First-time Adoption of International Financial Reporting Standards.


The amendments to IAS 12 were proposed in an exposure draft in September.


IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The IASB said in a press release that it can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, Investment Property . The IASB said the amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through sale.


As a result of the amendments, SIC-21, Income Taxes—Recovery of Revalued Non-Depreciable Assets, will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is withdrawn.


The amendments to IFRS 1 were published as separate EDs in August and September. The first amendment replaces references to a fixed date of “1 January 2004” with “the date of transition to IFRSs,” eliminating the need for companies adopting IFRS for the first time to restate derecognition transactions that occurred before the date of transition to IFRS. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRS after a period when the entity was unable to comply with IFRS because its functional currency was subject to severe hyperinflation.


The amendments to IFRS 1, set out in Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters , are effective from July 1, 2011. Earlier application is permitted.


More details on these amendments are available at ifrs.org .


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