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Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction


​On 17 July 2019, the IASB issued Exposure Draft ED/2019/5 Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Proposed amendments to IAS 12 ('the ED') with the comment period ending on 14 November 2019.

The ED addresses the issue that there is uncertainty in practice about how an entity applies the initial recognition exemption in paragraphs 15 and 24 of IAS 12 Income Taxes to transaction that give rise to both an asset and liability on initial recognition and may result in temporary differences of the same amount. In some cases, the exemption is applied, and in other cases it is not. Under the proposed amendments, the initial recognition exemption in IAS 12 would not apply to transaction that, at the time of the transaction, give rise to equal and offsetting amounts of taxable and deductible temporary differences.

EFRAG supports the IASB's effort to address current diversity in the application of initial recognition exemption of deferred tax for single transactions that give rise to an asset and liability.  EFRAG questions whether the IASB's approach ('gross method') that considers the unit of account in IAS 12 as being the asset and the liability rather than as a single transaction is the best approach given the complexity. We also have concerns with the recognition 'cap' in paragraph 22A(b) for a deferred tax liability, and the consequences of this proposal in subsequent periods.

EFRAG requests comments on its draft comment letter by 25 October 2019.

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