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EFRAG draft comment letter on proposed amendments to IAS 12

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

13 Sep 2019

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2019/5 ‘Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction — Proposed amendments to IAS 12'.

The exposure draft addresses the uncertainty in practice about how an entity applies the initial recognition exemption in paragraphs 15 and 24 of IAS 12 Income Taxes to transactions that give rise to both an asset and liability on initial recognition and may result in temporary differences of the same amount.

EFRAG is broadly supportive of the changes proposed; however, it questions whether the IASB's approach ('gross method') that considers the unit of account in IAS 12 as being the asset and the liability rather than as a single transaction is the best approach given the complexity. EFRAG also has concerns with the recogniton 'cap' in paragraph 22A(b) for a deferred tax liability, and the consequences of this proposal in subsequent periods.

Comments on EFRAG's draft comment letter are requested by 25 October 2019. For more information, see the press release and the draft comment letter on the EFRAG's website.

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