This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IAS 12 — Expected manner of recovery when calculating DT on indefinite life intangible assets

Date recorded:

IAS 12 Income Taxes - Expected manner of recovery of indefinite life intangible assets when measuring deferred tax – Agenda paper 2


The Interpretations Committee received a request to clarify how to determine the expected manner of recovery of indefinite life intangible assets for the purposes of measuring deferred taxes.

The question arises when an intangible asset has an indefinite life and is not amortised for financial reporting purposes but the applicable tax law allows or requires the asset to be amortised and, as a result, the asset’s tax base and its carrying amount differ.

The submitter identified three views: (i) use the tax rate (and tax base) applicable to ordinary taxable income unless there was a current plan to sell the asset in question; (ii) use the tax rate (and tax base) that would apply if the asset were sold; or (iii) select the appropriate tax rate as an accounting policy choice.

The issue was discussed in May 2016 (see agenda paper 10 for further detail).

The staff concluded that IAS 12 provides the general principle to identify the appropriate tax rate, which is to consider the expected manner of recovery. IAS 12 has two paragraphs (51B and 51C) that relate to assets measured under the revaluation model in IAS 16 and investment property, which require an entity to apply the tax rate if the asset was sold.

The staff analysis is that intangible assets are not non-depreciable assets and having an indefinite life does not mean having unlimited life. Accordingly, the general principle in IAS 12 applies, rather than the specific requirements in IAS 12.51B-C.

At the May meeting the staff was asked to clarify how to determine the expected manner of recovery in this situation and explore the interaction between how an asset is amortised and the general requirements of IAS 12. The purpose of this session is to discuss the staff analysis and the staff recommendation.

Staff analysis

The staff believes that the non-amortisation of an indefinite life intangible asset has no bearing on the manner of recovering its carrying amount. An intangible asset with an indefinite life is consumed, but there is no foreseeable limit on the period during which an entity expects to consume its benefits. Accordingly, even though an entity does not amortise an indefinite life intangible asset, an entity may expect to recover is carrying amount through use.

Staff recommendation

The staff recommends not to add the issue into the Interpretations Committee’s agenda. The staff proposes a tentative agenda decision which is included in appendix A of the agenda paper.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.