Temporary Difference in IAS 12 (Q)

Pproaccountant15y ago

Question:
As per IAS 12, deffered tax liability shall be recognized for all taxable temporary difference, except to the extent that the initial recognition of an asset or liability in a transaction which:
(a) is not a business combination and
(b) at the time of the time of the transaction, affect neither accounting profit not taxable profit ...

Can you further explain and give me the numerical example of the above situation/point?

Please reply as soon as possible.

Ddineshhh15y ago#1

Proaccountant..
These are two exemptions to the recognition of Deferred tax liability.
i) As a result of Business combination, a Deferred tax liability arises usually due to upward revaluation of Net assets of subsidiaries, which affects directly goodwill. Therefore the Deferred tax should not be recognized.

ii) Deferred tax is provided for the temporary differences, because they create difference between Taxable profit, and accouting profit. Where there no such case, DT should not be recognised.
If that initial recognition does neither affect Accounting nor Taxable profit, there doesn't appear to be that difference due to that transaction.

I hope, this helps you to remove your confusions.

Sign into reply to this topic.