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IAS 12 — Income Taxes

Effective date:

First effective as Canadian GAAP under Part I for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011 except for subsequent amendments.  Earlier application of Part I was permitted.

Published by the IASB:

October 1996

Included in Part I of CPA Canada Handbook:

January 2010

Overview

IAS 12 Income Taxes implements a so-called "comprehensive balance sheet method" of accounting for income taxes which recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of an entity's assets and liabilities. Differences between the carrying amount and tax base of assets and liabilities, and carried forward tax losses and credits, are recognized, with limited exceptions, as deferred tax liabilities or deferred tax assets, with the latter also being subject to a "probable profits" test.

Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, tax loss carryforwards and tax credit carryforwards. Deductible temporary differences are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences. Taxable temporary differences are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

Current tax for current and prior periods shall, to the extent unpaid, be recognized as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be recognized as an asset.

 

History of IAS 12

The following table shows the history of this standard subsequent to the adoption of IFRS in Canada.

Date1

Development

Comments

Included in Part I of the CPA Canada Handbook2

January 2010

Part I of the CPA Canada Handbook issued

Effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier application is permitted.

January 2010

December 20, 2010

Amended by Deferred Tax: Recovery of Underlying Assets

 

Paragraphs 51C-51E have been added to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model, and paragraph 51B has been added to incorporate the consensus from SIC-21 Income Taxes — Recovery of Revalued Non-Depreciable Assets for non-depreciable assets measured using the revaluation model in IAS 16 Property, Plant and Equipment.

The amended standard supersedes SIC-21.

These amendments are effective for annual periods beginning on or after January 1, 2012. Earlier application is permitted.

March 2011

January 19, 2016

Amended by Recognition of Deferred Tax Assets for Unrealized Losses (Proposed Amendments to IAS 12)

The IASB had concluded that the diversity in practice around the recognition of a deferred tax asset that is related to a debt instrument measured at fair value is mainly attributable to uncertainty about the application of some of the principles in IAS 12. Therefore the amendments consist of some clarifying paragraphs and an illustrating example.

The amendments are effective for annual periods beginning on or after January 1, 2017. Earlier application is permitted. As transition relief, an entity may recognize the change in opening retained earnings of the earliest comparative period on initial application. The IASB has not added additional transition relief for first-time adopters.

April 2016

December 12, 2017

Amended by Annual Improvements to IFRSs 2015 – 2017 Cycle (clarification of income tax consequences of dividends)

The amendment to IAS 12 clarifies that all income tax consequences of dividends (i.e. distribution of profits) should be recognized in profit or loss, regardless of how the tax arises.

The amendment is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted.

April 2018

Notes

  1. For further details of relevant developments prior to this, please refer to our Deloitte Global section.
  2. Newly issued, amended or revised IFRSs are part of Canadian GAAP only after they are approved by the Accounting Standards Board in accordance with its due process.

The above summary does not include details of consequential amendments made as the result of other projects.

Related Interpretations

Related IFRIC Agenda Rejection Notices

The rejection notices are available in our Deloitte Global section.

  • IAS 12 — Recognition of deferred taxes for the effect of exchange rate changes (July 2015)
  • IAS 12 — Impact of an internal reorganization on deferred tax amounts related to goodwill (May 2014)
  • IAS 12 — Accounting for market value uplifts on assets that are to be introduced by a new income tax regime (July 2012)
  • IAS 1 and IAS 12 — Presentation of payments on non-income taxes (July 2012)
  • IAS 12 — Rebuttable presumption to determine the manner of recovery (November 2011)
  • IAS 12 — Classification of tonnage taxes (May 2009)
  • IAS 12 — Deferred tax arising from unremitted foreign earnings (July 2007)
  • IAS 12 — Scope (March 2006)
  • IAS 12 — Single asset entities (November 2005)
  • IAS 12 — Non-amortizable intangible assets (July 2005)
  • IAS 12 — Deferred tax relating to finance leases (June 2005)
  • IAS 12 — Carryforward of unused tax losses and tax credits (June 2005)
  • IAS 12 — Estonian Dividend Tax (July 2004)
  • IAS 12 — Classification of interest and penalties that arise from unpaid tax obligations (June 2004)
  • IAS 12 — Discounting of current taxes payable (June 2004)
  • IAS 12 — Income Tax Accounting under the Tax Consolidation System – Subsidiary Leaving the Group (April 2003)
  • IAS 12 — Income tax omnibus (February 2003)
  • IAS 12 — Non-depreciable/depreciable assets (July 2002)
  • IAS 12 — Effective tax rates (February 2002)
  • IAS 12 — Asset revaluation (February 2002)

AcSB’s IFRS Discussion Group meetings

  • May 30, 2017 - IAS 12: Interest and Penalties Related to Income Taxes
  • November 29, 2016 - IAS 8 and IAS 12: Change in Tax Rate for Indefinite Life Intangible Assets
  • September 13, 2016 - IAS 12: Expected Manner of Recovery of Indefinite Life Intangible Assets when Measuring Deferred Tax
  • September 10, 2015 - IAS 12 and IAS 34: Income Tax Expense for Interim Periods
  • September 10, 2015 - IFRS 3 and IAS 12: Uncertain Tax Positions Acquired in a Business Combination
    IFRS 3 and IAS 12: Uncertain Tax Positions Acquired in a Business Combination
    IFRS 3 and IAS 12: Uncertain Tax Positions Acquired in a Business Combination

Amendments under consideration by the IASB

  • None

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