The International Accounting Standards Board (IASB) has published proposed amendments to IAS 12 Income Taxes, which addresses the accounting for income taxes, including deferred tax assets.
The amendments published August 20 propose guidance that clarifies how to account for deferred tax assets related to debt instruments measured at fair value.
The draft amendments are proposed in response to diversity in practice and are relevant in circumstances in which the entity reports tax losses.
Based on the IFRS Interpretation Committee's identification of diversity in practice and the different views taken, the IASB proposes in ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments to IAS 12) amendments aimed at clarifying several aspects.
It aims to clarify that unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
The proposal also suggests that changes in the carrying amount of an asset does not limit the estimation of probable future taxable profits.
The proposal also clarifies estimates for future taxable profits which exclude tax deductions resulting from the reversal of deductible temporary differences.
Another issue addressed is that an entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.