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Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction

Description

On 17 July 2019, the IASB issued Exposure Draft ED/2019/5 Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Proposed amendments to IAS 12 ('the ED'). The ED addresses uncertainty in practice about how an entity applies the initial recognition exemption in paragraphs 15 and 24 of IAS 12 to transactions that give rise to both an asset and liability on initial recognition and may result in temporary differences of the same amount. In some cases, the exemption is applied, and in other cases it is not. Under the proposed amendments, the initial recognition exemption in IAS 12 would not apply to transactions that, at the time of the transaction, give rise to equal and offsetting amounts of taxable and deductible temporary differences.
 
EFRAG issued its Draft Comment Letter (DCL) on 13 September 2019 and its Final Comment Letter on 14 November 2019.  EFRAG supported the IASB's efforts to address the current diversity in the initial recognition of deferred tax related to assets and liabilities arising from a single transaction. However, EFRAG thought that the proposals would add complexity to the application of IAS 12 and made some recommendations to the IASB. During the finalisation of the amendments, the IASB addressed a number of stakeholder concerns, including some reported by EFRAG in its DCL.

The IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) on 7 May 2021. The effective date is for annual periods beginning on or after 1 January 2023, with earlier application permitted. 

On 21 May 2021, the European Commission issued a letter requesting advice on the endorsement of the Amendments.

On 14 July 2021, EFRAG published its draft endorsement advice which was open for comment until 30 September 2021.

EFRAG submitted its Endorsement Advice Letter to the European Commission on 30 November 2021.

Next Steps

EFRAG has completed its diligences regarding its endorsement advice.

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