Prior to the amendment, there was uncertainty about the exemption applied to some transactions like leasing and decommissioning obligations as entity recognised both asset and liability. This gave rise to equal amounts of deductible and taxable temporary differences on initial recognition.
The amendment clarifies that the exemption does not apply. Companies are required to recognise deferred tax on such transactions, where equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendment will help to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations.
Deferred tax assets shall be recognised to the extent that:
The amendments to IAS 12 are effective for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted.
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