This free, guided checker walks your finance team through the key decision points for IAS 12 Tax Effect of Other Comprehensive Income. 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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Common OCI items include FVOCI debt and equity instruments, cash flow hedge reserves, remeasurements of defined benefit plans, and translation of foreign operations under IAS 21. Test each for a difference between carrying amount and tax base that creates current or deferred tax. The common trap is overlooking tax on amounts taken to reserves, which under IAS 12.61A must follow the pre-tax item into OCI rather than profit or loss.
No tax allocation to OCI is required; confirm no OCI item creates a temporary difference (IAS 12.61A).
Official guidance: IFRS issued standards
Map each OCI line item to its underlying asset or liability carrying amount versus tax base; hedge accounting and FVOCI elections often create OCI-related temporary differences.
Complete the OCI-to-temporary-difference mapping before period-end close (IAS 12.15).
Official guidance: IFRS issued standards
Under IAS 12.61A, current and deferred tax on an item recognised in OCI is itself recognised in OCI, and tax on an item recognised directly in equity is recognised in equity (IAS 12.62-62A). Trace each tax entry back to the presentation of the pre-tax item. The common trap is defaulting all tax to profit or loss and breaking the backwards-tracing principle for OCI items.
Reclassify the misallocated OCI tax from profit or loss to OCI (IAS 12.61A).
Official guidance: IFRS issued standards
For cash flow hedges and FVOCI instruments, recognise the tax in the same OCI reserve as the effective portion, cost-of-hedging amount, or fair value change it relates to, so each reserve is carried on a consistent post-tax basis (IAS 12.61A; IAS 12.62). Reconcile the tax to each hedge and FVOCI reserve line. The common trap is pooling the tax in a single OCI line rather than following each pre-tax component.
Align the OCI tax components with the hedge reserve and FVOCI reserve line items (IAS 12.61A).
Official guidance: IFRS issued standards
Cash flow hedge reserves and gains on FVOCI debt instruments are reclassified (recycled) to profit or loss when the hedged item or the debt affects profit or loss, carrying their deferred tax with them (IAS 1.92-93). FVOCI equity elections and defined benefit remeasurements never recycle. The common trap is treating a non-recycling reserve as though it recycles.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
When OCI is recycled to profit or loss, the tax effect previously recognised in OCI is reclassified with it so that total tax in profit or loss reflects the tax on the reclassified pre-tax amount (IAS 12.61A; IAS 1.95). Reconcile the reclassified tax to the hedge or FVOCI reserve released. The common trap is recycling the pre-tax gain while leaving its deferred tax stranded in accumulated OCI.
Post the reclassification adjustment for deferred tax on recycled OCI amounts (IAS 12.61A; IAS 1.92).
Official guidance: IFRS issued standards
IAS 1.92 requires items that may be reclassified to profit or loss to show reclassification adjustments; tax components follow the same presentation structure.
Add reclassification adjustment lines for the pre-tax and tax amounts in the OCI statement (IAS 1.92).
Official guidance: IFRS issued standards
FVOCI equity instruments and defined benefit remeasurements are never reclassified to profit or loss, so their related deferred tax stays in accumulated OCI until the asset is derecognised or the plan is settled (IAS 12.61A; IAS 1.93). Confirm the item's recycling classification first. The common trap is recycling the tax on a non-recycling item when the underlying reserve is realised.
Stop the inappropriate recycling of deferred tax on non-recycling OCI items (IAS 12.61A; IAS 1.93).
Official guidance: IFRS issued standards
Use enacted or substantively enacted rates expected to apply when the temporary difference reverses; update OCI tax when tax rates change.
Remeasure OCI deferred tax for enacted rate changes and reversal timing (IAS 12.47).
Official guidance: IFRS issued standards
Current tax attributable to an OCI item - for example withholding tax on a foreign exchange gain taken to OCI, or current tax on hedge ineffectiveness in OCI - is recognised in the same OCI component as the related pre-tax item unless legislation requires otherwise (IAS 12.58; IAS 12.61A). Trace the current tax to its originating item. The common trap is defaulting all current tax to profit or loss.
Reallocate current tax between profit or loss and OCI to match the related items (IAS 12.58; IAS 12.61A).
Official guidance: IFRS issued standards
IAS 12.81(ab) and IAS 1.90 require disclosure of the income tax relating to each component of other comprehensive income, presented either net of tax on the face with the tax disclosed in the notes, or gross with a single tax line. Include reclassification adjustments. The common trap is disclosing only an aggregate OCI tax figure rather than the tax by component.
Draft the OCI tax note with component-level tax amounts (IAS 12.81(ab); IAS 1.90).
Official guidance: IFRS issued standards
Tie deferred tax recognized in OCI to hedge reserves, FVOCI reserves, and remeasurement reserves; document movements from initial recognition, remeasurement, reclassification, and derecognition.
Tax effects of OCI are recognised, reclassified, and disclosed in accordance with IAS 12.61A (IAS 12.81(ab)). Complete the OCI deferred tax rollforward before authorisation (IAS 12.81(g)).
Official guidance: IFRS issued standards
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