The International Accounting Standards Board (IASB) on May 7 issued amendments to IAS 12, the IFRS standard on income taxes, to clarify how companies should account for deferred tax on transactions, like leases and decommissioning obligations.
IAS 12 Income Taxes details how a company accounts for income tax, including deferred tax, which represents tax payable or recoverable in the future, the group said in a statement.
Companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time in certain cases. There had been some uncertainty before about whether the exemption applied to transactions such as leases and decommissioning obligations, however, the IASB said. With such transactions, companies recognize both an asset and a liability.
The amendments stipulate that the exemption does not apply and that companies must recognize deferred tax on such transactions, it said.
The amendments will apply to annual reporting periods beginning on or after January 1, 2023. Early application will be allowed, the group said.
To access Deferred Tax related to Assets and Liabilities arising from a Single Transaction, go to: https://www.ifrs.org/premium/, where an IFRS digital subscription is required.
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