Proposed amendments to accounting for deferred tax
FINANCIAL REPORTING INSIGHTS |
In specific circumstances, companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time. There has been some uncertainty about whether the exemption applies to leases and decommissioning obligations. Therefore, the International Accounting Standards Board recently issued proposed narrow-scope amendments to International Accounting Standard (IAS) 12, Income Taxes, to clarify how companies account for deferred tax on leases and decommissioning obligations.
Per the proposed amendments, the exemption in IAS 12 would not apply to leases and decommissioning obligations—transactions for which companies recognize both an asset and a liability. The proposed amendments would result in companies recognizing deferred tax on such transactions.
The Exposure Draft, Deferred Tax related to Assets and Liabilities arising from a Single Transaction, is available for comment until November 14, 2019.