Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
Tier 1 and Tier 2
Issued 1 July 2021
The For-profit Accounting Standard is based on equivalent amendments to IAS 12 Income Taxes issued by the International Accounting Standards Board (IASB).
The purpose of the amendments is to clarify the accounting for deferred tax on transactions, such as leases and decommissioning obligations, that lead to the recognition of an asset and liability from a single transaction.
In specific circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. There has been uncertainty about whether the exemption applies to leases and decommissioning obligations.
To promote consistent application of IAS 12, the IASB has issued narrow-scope amendments that clarifies that the exemption does not apply for these transactions and deferred tax would be recognised.
The amending standard is effective for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted.