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IAS 12 Amendments: Recognition of Deferred Tax Assets for Unrealised Losses


Project History

In March 2010, the Interpretations Committee was asked to provide guidance on how an entity determines, in accordance with IAS 12, whether to recognise a deferred tax asset (DTA) when the entity:  
  • has deductible temporary differences relating to unrealised losses on debt instruments that are classified as available-for-sale financial assets in accordance with IAS 39 and measured at FVOCI (the same rationale would apply for debt instruments measured at FVOCI under IFRS 9);
  • has the ability and intention to hold the instruments until the loss reverses (which may be at their maturity); and
  • has insufficient taxable temporary differences and no other probable taxable profits against which the entity can utilise those deductible temporary differences.

Following the recommendations from the Interpretations Committee, in May 2012, the IASB proposed several clarifications in the Exposure Draft Annual Improvements to IFRSs 2010-2012 Cycle in order to resolve the significant diversity in practice.

The Interpretations Committee discussed the comments received on the proposed amendment to IAS 12 and concluded that clarifying the accounting for DTAs for unrealised losses on debt instruments measured at FVOCI required further discussion and analysis. The IASB tentatively decided that the most appropriate path forward to clarify the issue was to develop a separate narrow-scope project to amend IAS 12.

On 20 August 2014, the IASB published the Exposure Draft ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses (Proposed Amendments to IAS 12) (the ED). The ED proposed to:

  • confirm that decreases in the carrying amount of a fixed-rate debt instrument, for which the principal is paid on maturity, give rise to a deductible temporary difference if this debt instrument is measured at fair value and if its tax base remains at cost. This applies irrespective of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use, ie by holding it to maturity, or whether it is probable that the issuer will pay all the contractual cash flows;
  • clarify the extent to which an entity's estimate of future taxable profit (paragraph 29 of IAS 12) includes amounts from recovering assets for more than their carrying amounts;
  • clarify that an entity's estimate of future taxable profit (paragraph 29 of IAS 12) excludes tax deductions resulting from the reversal of deductible temporary differences; and
  • clarify that an entity assesses whether to recognise the tax effect of a deductible temporary difference as a deferred tax asset in combination with other deferred tax assets. If tax law restricts the utilisation of tax losses so that an entity can only deduct tax losses against income of a specified type or specified types (eg if it can deduct capital losses only against capital gains), the entity must still assess a deferred tax asset in combination with other deferred tax assets, but only with deferred tax assets of the appropriate type.

EFRAG's comment letter 

EFRAG published a draft comment letter on 12 September 2014. Responses and comments to EFRAG's draft comment letter were requested by 28 November 2014. EFRAG considered comments from constituents and approved its final comment letter which was published on 8 January 2015. In its final comment letter, EFRAG supports the core of the proposals in the ED. However, EFRAG has some concerns and wording suggestions that we recommend are taken into account when finalising the amendments to ensure that the welcomed clarifications are fully effective.

The Amendments

On 19 January 2016, the IASB issued Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12).

EFRAG's Endorsement Advice

On 11 April 2016, EFRAG issued its draft endorsement advice in which EFRAG concluded that the Amendments satisfy all criteria for EU endorsement and therefore recommended their endorsement.

After having considered feedback from its constituents, EFRAG published its final endorsement advice on 8 June 2016 where it supported the adoption of the Amendments and recommended their endorsement. EFRAG’s recommendation is explained in the letter to the European Commission and the accompanying Appendices.


The Amendments were endorsed on 6 November 2017. The endorsement decision was published in the Official Journal of the European Union on 9 November 2017.

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