Recognition of deferred tax assets for unrealised losses: proposed amendments to IAS12

Comments from ACCA to the International Accounting Standards Board
17 December 2014

General comments


We are supportive of the proposed amendments to IAS12.

While to a large extent these amendments reflect how many would interpret IAS12 already, we accept that there appears to have been divergent treatments in practice and therefore these amendments should work to reduce that divergence. Judgement will nevertheless remain in the application of the standard. The example is a helpful illustration.



Specific comments

Q1. Existence of a deductible temporary difference

We agree with the proposed amendment confirming that, irrespective of other considerations, a decrease in the carrying amount of a fixed rate debt gives rise to a deductible temporary difference when the instrument is stated at fair value and the tax base remains at cost.

Q2. Recovering an asset for more than its carrying amount

We agree with the amendment proposed which clarifies the extent to which estimates of future taxable profits can include the recovery of assets for more than their carrying amounts.

The last two sentences, however, of paragraph 29A do not seem to be helpful additions and we suggest they are deleted. They potentially run counter to some aspects of other parts of the exposure draft. For instance the example illustrating 26(d) could be a case where there is impairment now but recovery of a greater amount will take place if held to maturity. Also recovery in excess of carrying amount may depend on more factors than measurement at cost and profitable operation – for example length of time since purchase, depreciation, expected rate of return at purchase etc.

Q3. Probable future taxable profit against which deductible temporary differences are assessed for utilisation

We agree with the proposed amendment.

Q4. Combined versus separate assessment

We agree with the proposed amendment to clarify that the recovery of a deferred tax asset must be assessed in combination with other deferred tax assets, but only with assets of the appropriate type reflecting the legal restrictions on the utilisation of losses.

Q5. Transition

We agree with the proposed transitional provisions. The limited retrospective application for the majority of companies applying it, seems a reasonable balance between the costs to the preparers and the benefits to users. We note the need for consistency with IFRS1 for the first time application.