In this session, the Board discussed additional analysis and preliminary recommendations on how to address the matters raised in the feedback on the Exposure Draft to the IFRS Interpretations Committee. The staff have conducted further research in exploring the standard-setting options and have identified two standard-setting options. The Committee discussed the submission at its meetings in March 2018 and June 2018 and came to the conclusion that the matter was relevant and widespread, as there are various kinds of contracts and fact patterns affected. To take away this difference the IFRIC staff proposes a narrow scope amendment to IAS 12 which entails that the initial recognition exemption should not be does not reflect the future tax impacts of leases (Approach 1); or By using this site you agree to our use of cookies. On the other hand, and according to para. exemption. Based on this approach, deferred tax was not recognised on permanent differences (income or expenses that appeared in either the financial statements or the tax return but not in both). In this session, the Board discussed the Committee's recommendation to propose a narrow-scope amendment to IAS 12 so that the initial recognition exemption would not apply to transactions that give rise to both taxable and deductible temporary differences to the extent the amounts recognised for the temporary differences are the same. to the application of the initial recognition exemption in IAS 12 . hyphenated at the specified hyphenation points. Current tax for current and prior periods shall, to the extent unpaid, be recognised as a liability. IASB Publishes Proposed Amendments to IAS 12. As a result there is a difference in tax accounting depending on the allocation of the tax base. recognition of a deferred tax liability and a corresponding increase in the carrying value of the related assets on the initial recognition of an asset in a transaction that is not a business combination and for which the tax basis is less than its cost. It is important to note that this exemption relates to impacts resulting from initial recognition only. 12 Jun 2018. or, at the time of the transaction, affects neither accounting profit nor taxable profit. José Antonio Abraján (jose.abrajan@mx.ey.com), Deferred taxes Senior Manager, EY Mexico, The principal Mexican correspondents of the Compliance Management channel on www.internationaltaxreview.com. The IASB first discussed this issue in October 2018. So let’s see what’s inside. This site uses cookies to provide you with a more responsive and personalised service. The AcSB’s due process includes: IAS 12 Initial recognition exception Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IAS 12 Initial recognition exception This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2. Option 2 – Gross up the asset by adding the income tax, Gross up amount of the asset with the related deferred income tax. 1. and the lease liability under IFRS 16 … This section covers: • the recoverability of deferred tax assets where taxable temporary differences are available deferred tax [ias 12] exemptions p15(b) ILLUSTRATION: SOLUTION 31/12/X6 Fair value [NRC] 430 000 Tax base Nil . Consider the following example and compare it to previous example where all temporary differences resulted from subsequent accounting. Entity A acquires an asset for $10 million t… Currently, in some cases, the exemption is applied, and in other cases it is not. The Board discussed deferred tax relating to assets and liabilities arising from a single transaction (proposed amendments to IAS 12). IAS-12 states that adjusting the carrying value of the book value with the related will make the financial statements “less transparent”. Once entered, they are only Mexico. In some jurisdictions, the revaluation or other restatement of an asset to fair value affects taxable profit (tax loss) for the current period. Q&A IAS 12: 15(b)-4 — Initial Recognition Exception — Transfers of Assets Between Group Entities. Gustavo Gómez (gustavo.gomez@mx.ey.com), Tax partner, EY Mexico. Recognise a deferred tax expense of $300 by adjusting the carrying value of the book value of the asset. In March 2018 the Committee discussed a submission about the recognition of deferred tax when a lessee recognises an asset and liability at the commencement date of a lease applying IFRS 16 Leases and whether the initial recognition exemption in paragraphs 15 and 24 of IAS 12 would apply to those temporary differences. If you're happy with cookies click proceed. EY’s other tax compliance partners in Mexico City are: Hector Armando Gama Baca (hector.gama@mx.ey.com), Fernando Tiburcio Lara (fernando.tiburcio@mx.ey.com), Juan Manuel Puebla Domínguez (juan-manuel.puebla@mx.ey.com), Raúl Tagle Cázares (raul.tagle@mx.ey.com), Raúl Federico Aguilar Millán (federico.aguilar@mx.ey.com), Ricardo Delgado Acuña (ricardo.delgado@mx.ey.com). Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. Brazil, margaret.varela-christie@euromoneyplc.com. Prime examples of this are Leases under IFRS 16 and Decommissioning Obligations. IAS 12 has an initial recognition exemption in respect of such a deferred tax liability. IAS 12 also requires the recognition of deferred tax liabilities for taxable temporary differences in The general rule is to recognise deferred tax liabilities for all taxable temporary differences, except to the extent that they are within the scope of the IRE mentioned in IAS-12. Taxable temporary differences 15 - 23 Deductible temporary differences 24 - 33 ... IAS 12 Income Taxes was issued by the International Accounting Standards Committee (IASC) in October 1996. Future taxable amounts arising from recovery of the asset will be capped at the asset's carrying amount. Diversity in application of IAS 12’s initial recognition exemption At present, when a company recognises a lease asset and lease liability, for example, it either: applies the initial recognition exemption (IRE) separately to the lease asset and lease liability and recognises the tax impacts in profit or loss when they are incurred – i.e. Show contents . This example shows the appliance of the IRE: Depreciation is not deductible for tax purposes. The initial recognition of an asset or liability in a transaction which: Business combinations: The initial recognition of goodwill because the deferred tax asset or liability form part of the goodwill arising or the bargain purchase gain recognised. Tax law is complex and subject to interpretation ― entities need to evaluate tax uncertainties in applying IAS 12. These amendments clarify that the recognition exemption will not apply to temporary differences that may arise on initial recognition of an asset and a liability relating to a lease or decommissioning obligation. The Committee received a request to interpret how IAS 12 should be applied when a lessee recognises an asset and liability at commencement of a lease (applying either IFRS 16 'Leases' or IAS 17 'Leases'). In a transaction where the IRE does apply to the goodwill as following: IRE does not apply to transactions affecting taxable profit or accounting profit (or both) because those kind of transactions are not permanent items. On disposal any capital gain will be taxable or any capital loss will be not deductible. However, IAS 12 prohibits a company from doing so if the recognition exemption applies. The standard IAS 12. guides us in the area of income taxes and really, it is not an interesting easy-to-read novel.. 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