IAS 12 – Impact of an internal reorganisation on deferred tax

Date recorded:

The project manager introduced the paper which related to a request for guidance received by the IC on the calculation of deferred tax as a consequence of an internal reorganisation of an entity. In particular, the request described a circumstance in which: (a) an entity (Entity H) transferred a group of assets, including the related goodwill, that meets the definition of a business in IFRS 3 Business Combinations to its new wholly-owned subsidiary (Subsidiary A); however, (b) for tax purposes, the (tax) goodwill was not transferred to Subsidiary A. The submitter asked the IC to clarify how to calculate deferred tax assets and deferred tax liabilities in Entity H’s consolidated financial statements. Agenda paper 6 included a summary of the discussion held in January 2014 (where the IC concluded not to add this issue to the agenda) and comment letters received. Based on those comments, the staff decided to add one additional paragraph and still recommended not to add this issue to the agenda.

The paragraph added read as follows:

The Interpretations Committee also noted that transferring assets between the entities in the consolidated group would not typically affect the consolidated financial statements in terms of recognition, measurement and presentation of deferred tax, if there is no effect on the tax base of assets or liabilities, the tax rate applicable to the recovery or settlement of those assets or liabilities or the recoverability of any related deferred tax asset and offsetting requirements of IAS 12 are met.


One IC member expressed disagreement with the wording of the paragraph added because it could create more confusion.  His concern was because trying to speculate about the tax consequences of transfers between group entities would be dangerous, intragroup transactions could be across jurisdictions and the consequences would be different.   Other IC members also disagreed with the wording.

The chairman called a vote and the majority of IC members voted to change the wording of the paragraph.

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