Deferred tax in a business combination — Accounting glossary

Under IFRS 3 and IAS 12, acquisition-date fair-value adjustments can create temporary differences even if the tax bases do not change. Recognise the relevant deferred tax asset or liability subject to IAS 12 recognition and exception rules, and incorporate it into identifiable net assets when calculating goodwill. Do not treat the temporary difference itself as the deferred tax amount: apply the appropriate tax rate.

Worked example

An acquired asset has fair value $300,000 and tax base $220,000. At a 25% tax rate, the $80,000 taxable temporary difference creates a $20,000 deferred tax liability, assuming no exception applies; this reduces acquisition-date net assets.

Common mistake

Omitting deferred tax on a fair-value uplift or adding the $80,000 temporary difference itself to the liability rather than $20,000 tax.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Supporting	September 2026–June 2027
ACCA	SBR	Direct	September 2026–June 2027