The proposals in ED/2012/1 Annual Improvements to IFRSs: 2010-2012 Cycle included proposals to amend IAS 12 Income Taxes to clarify when a deferred tax asset should be recognised for unrealised losses. In response to constituent feedback on the proposals, the IASB decided that the accounting for deferred tax assets for unrealised losses on debt instruments should be clarified by a separate narrow-scope project to amend IAS 12.
Based on the IFRS Interpretation Committee's identification of diversity in practice and the different views taken, the IASB proposes in ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments to IAS 12) amendments aimed at clarifying the following aspects:
- Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
- The carrying amount of an asset does not limit the estimation of probable future taxable profits.
- Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
- An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
Transition requirements and effective date
The ED proposes limited retrospective application of the amendments for entities already applying IFRS. However, full retrospective application is proposed for first-time adopters of IFRS.
The ED does not contain a proposed effective date. The IASB will consider this point based on the comments that it receives.
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