On 20 December 2010, the International Accounting Standards Board (IASB) published Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12). The amendments provide an exception to the general principle in IAS 12 that the measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which the entity expects to recover the carrying amount of an asset.

The amendments were issued in response to concerns that application of this principle can be difficult or subjective particularly for an investment property measured at fair value because it may be that the entity intends to hold the asset for an indefinite or indeterminate period of time, during which it anticipates both rental income and capital appreciation. Gains and losses from the recovery of an asset through sale may be taxed at a different rate from that applicable to income earned from using the same asset. Additionally, different tax bases may be ascribed to the same asset depending on the manner of recovery. For example, some jurisdictions may provide cost base plus an indexation allowance for inflation on disposal, but allow no deductions for depreciation, or allow depreciation only on the original cost. These factors have resulted in confusion and potential inconsistency in applying this principle in practice.

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