This free, guided checker walks your finance team through the key decision points for IAS 12 Deferred Tax Recognition. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Temporary differences arise when accounting and tax bases diverge at the reporting date, including from depreciation methods, provisions, fair value adjustments, and unrecognised tax losses carried forward.
No deferred tax arises when the carrying amount equals the tax base at the reporting date (IAS 12.5).
Official guidance: IFRS issued standards
Taxable temporary differences create deferred tax liabilities when the carrying amount will generate taxable amounts on recovery or settlement; deductible differences create deferred tax assets.
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Official guidance: IFRS issued standards
IAS 12.15 and 24 exceptions include goodwill, initial recognition of assets or liabilities in transactions that are not business combinations and affect neither accounting nor taxable profit, and investments in subsidiaries when remittance timing is controlled.
Apply the applicable IAS 12.15 or IAS 12.39 exception and do not recognise deferred tax for this difference.
Official guidance: IFRS issued standards
Measurement uses enacted or substantively enacted tax rates at the reporting date that apply to the period when the asset is recovered or liability settled; remeasure when rates change with effect in profit or loss.
Measure the DTL at enacted or substantively enacted rates before finalising the tax balance.
Official guidance: IFRS issued standards
The exemption applies only when the DTA arises on initial recognition of an asset or liability in a transaction that is not a business combination, affects neither accounting profit nor taxable profit, and does not give rise to equal taxable and deductible temporary differences (IAS 12.24). Business combination fair value adjustments and post-recognition changes are outside the exemption. Leases and decommissioning obligations that create equal offsetting differences also fall outside it under the IAS 12.22A amendment.
Do not recognise a deferred tax asset for this initial recognition exemption item (IAS 12.24).
Official guidance: IFRS issued standards
IAS 12.24 requires recognition of a DTA for deductible temporary differences only to the extent that taxable profit will probably be available; IAS 12.34 applies the same threshold to unused tax losses and credits. Reversing taxable differences relating to the same tax authority and entity are the primary source of evidence (IAS 12.28), before relying on forecasts or tax planning opportunities (IAS 12.29).
Do not recognise a deferred tax asset until probable taxable profit becomes available; reassess at each reporting date (IAS 12.24; IAS 12.37).
Official guidance: IFRS issued standards
Recognition is capped at the amount that probable taxable profit will absorb; the IAS 12.36 criteria guide the assessment for unused losses and credits. The carrying amount is reviewed at each reporting date and reduced when recovery is no longer probable (IAS 12.56), while previously unrecognised amounts are recognised when recovery becomes probable (IAS 12.37).
Limit DTA recognition to the extent of probable taxable profit before finalising the balance (IAS 12.24; IAS 12.34).
Official guidance: IFRS issued standards
Unused tax losses and credits follow the same recognition criteria as deductible temporary differences; future reversals of existing taxable differences may provide evidence of probable taxable profit.
Extend the probable-profit assessment to unused losses and credits as IAS 12.34-36 require before recognising any carryforward DTA.
Official guidance: IFRS issued standards
IAS 12.74 permits offset when the entity has a legally enforceable right to set off current tax and intends either to settle net or to realise the asset and settle the liability simultaneously.
Present deferred tax gross unless both IAS 12.74 offset criteria - a legally enforceable right of set-off and balances levied by the same taxation authority - are met.
Official guidance: IFRS issued standards
IAS 1 prohibits classifying deferred tax as current; all deferred tax assets and liabilities are presented as non-current in the statement of financial position.
Reclassify all deferred tax balances as non-current as required by IAS 1.56.
Official guidance: IFRS issued standards
Deferred tax on items recognised in OCI or directly in equity is also recognised in OCI or equity, including revaluations, cash flow hedge reserves, and business combination adjustments outside P&L.
Finalise deferred tax balances with the IAS 12.81 disclosures of temporary differences and the tax rate reconciliation. Allocate deferred tax to OCI or equity for items recognised outside profit or loss, as IAS 12.61A requires.
Official guidance: IFRS issued standards
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