IASB Proposes Amendment to Aspect of Deferred Tax Accounting

The International Accounting Standards Board (IASB) on Friday published for public comment an exposure draft, Deferred Tax: Recovery of Underlying Assets , that would amend one aspect of IAS 12, Income Taxes.


The IASB said it is setting an exposure period of 60 days—shorter than its normal 120 days—because the amendments address a problem that exists in practice and needs to be solved as soon as possible. The board also said the proposed amendments are straightforward and the ED is short.


Under IAS 12, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using the asset or by selling the asset. In some cases, it is difficult and subjective to assess whether recovery will be through use or through sale.


The proposed amendments state that, in specified circumstances, the measurement of deferred tax liabilities and deferred tax assets should reflect a rebuttable presumption that the carrying amount of the underlying asset will be recovered entirely by sale.


The specified circumstances are that the deferred tax liability or deferred tax asset arises from:  

(a) Investment property, when an entity applies the fair value model in IAS 40, Investment Property; or

(b) Property, plant and equipment or intangible assets, when an entity applies the revaluation model in IAS 16, Property, Plant and Equipment , or IAS 38, Intangible Assets.

The presumption is rebutted only when an entity has clear evidence that it will consume the asset’s economic benefits throughout its economic life.


Comments on the proposal are due Nov. 9. The ED is available in the “Comment on a proposal” section under the “Get involved” tab at www.ifrs.org . The IASB will set an effective date for the proposed requirements when it approves the amendments.


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