The proposal would amend one aspect of
IAS 12 Income Taxes. Under IAS 12, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using the asset or by selling the asset. In some cases, it is difficult and subjective to assess whether recovery will be through use or through sale. To provide a practical approach in such cases, the proposed amendment would introduce a presumption that an asset is recovered entirely through sale unless the entity has clear evidence that recovery will occur in another manner.
We appreciate the fact that the Board is trying to address the difficult practical issues that can arise when calculating and measuring deferred taxes associated with assets that are remeasured or revalued at fair value. However, we do not support the proposed exception to the principles in IAS 12 (see box below). Click to Download our Comment Letter (PDF 58k). All of our past comment letters are Here.
Although we agree that additional guidance would be useful in this area, we do not support the introduction of an exception to the existing principles of IAS 12. Instead, we recommend the Board provides additional implementation guidance to illustrate how the existing principles within IAS 12 should be applied. In developing this implementation guidance, the Board should consider an approach based on an entity's underlying business model, an approach that we believe to be consistent with the current requirements in IAS 12.52.