International FInancial Reporting Bulletin – Issue 2019-03
09 August 2019
IAS 12, Income Taxes establishes criteria that must be satisfied in order for unused tax credits, tax losses and deductible temporary differences to be recognised as deferred tax assets (‘DTAs’). The requirements and guidance are primarily contained within IAS 12.34-36, which established:
- The probability requirements for determining whether future taxable profits are sufficiently likely to conclude that unused tax losses and tax credits may be recognised as DTAs, along with accompanying criteria (IAS 12.34, 36); and
- What ‘convincing other evidence’ may be required to support an assertion that sufficient taxable profits will be available to utilise unused tax losses and tax credits in situations where the reporting entity has had a history of recent losses.
ESMA and European enforcement agencies have discussed issues relating to these two aspects of IAS 12 at European Enforcers Coordination Sessions (‘EECS’). Several situations were noted where enforcers identified that material DTAs were recognised when significant doubt existed as to whether the applicable recognition criteria in IAS 12 were satisfied.
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