Deductible temporary difference
Recognise a deferred tax asset only to the extent it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, subject to IAS 12’s requirements and exceptions. Compare carrying amount and tax base and analyse the future tax effects: the direction can differ between an asset and a liability.
Worked example
A recognised provision has carrying amount $20,000 and tax base nil because its cost is deductible only when paid. The $20,000 deductible temporary difference gives a $5,000 deferred tax asset at 25%, if sufficient taxable profit is probable and no exception applies.
Common mistake
Recognising every possible deferred tax asset without assessing recoverability or assuming a tax-base excess is required for a liability.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |