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 13


The Interpretations Committee received a request to clarify the determination of the expected manner of recovery of indefinite life intangible assets for the purposes of measuring deferred taxes. The question arises when: (a) for financial reporting purposes, an intangible asset is considered to have an indefinite life and is therefore not amortised in applying IAS 38 Intangible Assets; (b) the applicable tax law allows or requires the asset to be amortised and the amortisation is deductible in determining taxable income; and (c) as a result, the asset’s tax base differs from its carrying amount. The submitter identified three views: (i) use the tax rate (and tax base) applicable to ordinary taxable income unless there is 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 purpose of this session was to discuss the issue, analyse the staff research and the staff recommendation.

Staff analysis

The staff conducted outreach activities with accounting standard setters and accounting firms to identify whether the issue was common and there was diversity in practice. The majority of standard-setters indicated that the issue is not common while the accounting firms indicated that the issue is common and there is diversity in practice. The staff indicated that paragraphs 51 and 51A of IAS 12 provided the general principle to identify the appropriate tax rate; which require an entity to consider the expected manner of recovery while paragraphs 51B and 51C of IAS 12 were applicable to specific type of assets (non-depreciable assets measured under the revaluation model under IAS 16 and investment property) which required an entity to apply the tax rate considering that the asset would be sold. The staff considered that intangible assets could not be considered as non-depreciable assets because having indefinite life did not mean having unlimited life. Accordingly, an entity must apply the general principle of IAS 12 to determine the applicable tax rate for measuring deferred taxes.  The staff also noted that the Board had already considered including specific requirements relating to deferred tax arising from intangible assets measured using the revaluation model in IAS 38 when amended IAS 12 in 2010 but, on the basis of the feedback received, decided not to do so.

Staff recommendation

The staff recommended that the Interpretations Committee should not take this issue into its agenda because the staff considered that the Standard provides sufficient guidance to measure deferred taxes. Appendix A of the agenda paper included the wording for the tentative agenda decision suggested by the staff.


This issue was not discussed during this meeting due to a lack of time. It will be discussed at the next meeting of the IFRS Interpretations Committee in May 2016.

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