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IAS 12 — Recognising deferred tax assets for unrealised losses on AFS debt securities

Date recorded:

The Committee considered a request relating to how an entity determines, in accordance with IAS 12 Income Taxes, whether to recognise a deferred tax asset relating to unrealised losses on available-for-sale debt securities (AFS debt securities).

The issue relates to the interpretation and application of IAS 12.24 and 29 and the recognition of deferred tax assets when there are insufficient taxable temporary differences available and the entity must consider tax planning opportunities available that will create taxable profit in appropriate periods.

The Committee agreed with the staff's analysis that the entity's ability and intent to hold the AFS debt securities until the unrealised loss reverses is not a 'tax planning opportunity' in accordance with IAS 12.29. Consequently, a deferred tax asset in relation to the deductible temporary difference at the reporting date may only be recognised in accordance with IAS 12.24 as part of a combined assessment with other temporary differences.

The Committee’s conclusion on this issue is consistent with the decision that the FASB reached under the AFI project on the same issue. As such, IFRSs and US GAAP should continue to be converged on this issue.

The Committee agreed to issue a tentative Agenda Decision reflecting their views.

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