© 2019 Euromoney Institutional Investor PLC. If the amount paid exceeds the amount due for Income Taxes. The material on this site is for financial institutions, professional investors and their professional advisers. The Board discussed deferred tax relating to assets and liabilities arising from a single transaction (proposed amendments to IAS 12). 4 | IAS 12 Income Taxes RECOGNITION AND MEASUREMENT Current tax – Recognition and measurement IAS 12 requires the recognition of current tax in an entity’s financial statements. Diversity in application of IAS 12’s initial recognition . In some jurisdictions, the revaluation or other restatement of an asset to fair value affects taxable profit (tax loss) for the current period. One of these circumstances is the recognition of a transaction that affects neither On 1 January 2019, the right-of use asset. All Previous lack of guidance in IAS 12 resulted in diversity in practice. Membership Options | One Week Trial, This content is from: Option 4 – Do not recognise any deferred tax liability at all. Recognise a deferred tax expense of $300 by adjusting the carrying value of the book value of the asset. 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. 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). Initial recognition of goodwill. 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 IASB Publishes Proposed Amendments to IAS 12. IASB Publishes Proposed Amendments to IAS 12. Instant access to all of our content. In this session, the Board discussed whether they agree with the effective date of the amendments, confirm that due process requirements have been met and to ask if any Board members intend to dissent from the amendments. 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. 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. Entity A acquires an asset for $10 million t… However, IAS 12 prohibits a company from doing so if the recognition exemption applies. 12. Mexico. IAS-12 states that adjusting the carrying value of the book value with the related will make the financial statements “less transparent”. The IFRS Interpretations Committee received a submission about IAS 12 Income Taxes and the recognition of deferred tax in relation to leases (when a lessee recognises an asset and a liability at the lease commencement) and decommissioning obligations (when an entity recognises a liability and includes the decommissioning costs in the cost of the item of of property, plant and equipment). For help please see our FAQ. The IRE does not apply to transactions affecting taxable profit or accounting profit (or both). Please read, Disclosure initiative — Accounting policies, IAS 12 — Deferred tax related to assets and liabilities arising from a single transaction, IAS 19/IFRIC 14 — Remeasurement at a plan amendment, curtailment or settlement / Availability of a refund of a surplus from a defined benefit plan, IFRS 16 — Lease liability in a sale and leaseback, IAS 12 — Deferred tax – tax base of assets and liabilities, Updated IASB work plan — Analysis (November 2020 meeting), Updated IASB work plan — Analysis (October 2020 meeting), Updated IASB work plan — Analysis (September 2020), Updated IASB work plan — Analysis (July 2020 meeting), Updated IASB work plan — Analysis (April 2020 regular meeting), Updated IASB work plan — Analysis (April 2020 supplementary meeting), Deloitte comment letter on the IASB's proposed amendments to IAS 12, IFRS in Focus — IASB proposes amendments to IAS 12 'Income Taxes'. The AcSB’s due process includes: Initial recognition exemption > Impacts deferred taxes: A deferred tax asset or liability is not recognized if: it arises from the initial recognition of an asset or liability in a transaction that is not a business combination; and; at the time of the transaction it affects neither accounting profit nor taxable profit. Current tax for current and prior periods shall, to the extent unpaid, be recognised as a liability. The standard IAS 12. guides us in the area of income taxes and really, it is not an interesting easy-to-read novel.. The initial recognition of an asset or liability in a … hyphenated at the specified hyphenation points. 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. expense in profit or loss according to para. The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. The IRE represents the best option for dealing with “day one” taxable temporary differences. 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. 12 Jun 2018. Read ED/2019/5 Deferred Tax relating to Assets and Liabilities arising from a single transaction; Prime examples of this are Leases under IFRS 16 and Decommissioning Obligations. Deferred taxes – the initial recognition exception (IRE) related to taxable temporary differences – what you should consider under IAS 12 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. 2019. July 2019. 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). 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. 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'). Under the proposed amendments, the initial recognition exemption in IAS 12 would not apply to a transaction that at the time of the transaction gives rise to equal and offsetting amounts of … Pattern assumed that lease payments and Decommissioning Obligations in diversity in practice draft of proposed amendments to IAS has. 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