IAS 12 – Clarification of circumstances in which presumption of manner of recovery of investment property can be rebutted (new)

Date recorded:

Paragraph 51C of IAS 12 Income Taxes (which was added in December 2010 as an amendment to IAS 12) contains a presumption that the carrying amount of an investment property will be recovered through sale. The Committee received a request to clarify whether that presumption can be rebutted in cases other than the case described in paragraph 51C.

A few Committee members expressed a view that the original intention of the case described in paragraph 51C was an 'if and only if' exception, such that no other cases other than that described in paragraph 51C would rebut the presumption that the carrying amount of an investment property would be recovered through sale. This view was expressed in reference to guidance in paragraph BC11 of IAS 12.

However, other Committee members expressed a desire for further clarity as to the original intention of the IASB in adding paragraph 51C before concluding whether the case in paragraph 51C was all-inconclusive. A number of Committee members believed the intention of the IASB was to prevent bifurcation of recovery of the carrying amount of an investment property between recovery through sale and recovery through use; a belief which was confirmed by an IASB member in attendance. Based on the objective of the amendment, these Committee members saw paragraph 51C as providing a possible case as opposed to all possible cases.

While one Committee member desired to reject adding this item to the Committee's agenda given that it appeared to be a theoretical (as opposed to practical) question, other Committee members were concerned that a rejection would result in individuals reverting to the staff paper as application guidance and the staff paper expressed a different view than that which was being expressed by a majority of Committee members.

Considering the above, the Committee tentatively decided that a rejection notice should be issued which expresses that paragraph 51C does not provide an exhaustive list of cases in which the presumption can be overcome (not 'if and only if' case). The notice would also express that the scope of the rebuttable presumption is that there is no possibility of bifurcating asset recovery between recovery through use and recovery through sale.

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