EFRAG comments on the IASB's ED Deferred Tax: Recovery of Underlying Assets
09 November 2010
EFRAG has issued its comment letter on the IASB Exposure Draft on Deferred Tax: Recovery of Underlying Assets.
In September 2010, the IASB issued the Exposure Draft Deferred Tax: Recovery of Underlying Assets – Proposed amendments to IAS 12 (the ED). The proposed amendments introduce an exception to the measurement principles in IAS 12. The purpose of the proposed amendments is to provide a practical approach in those cases where it is difficult or subjective to determine the manner in which an entity expects to recover the carrying amount of its assets.
EFRAG agrees that the existing IAS 12 lacks guidance on the accounting for income tax in relation to assets for which the tax consequences depend on the way the carrying amount of the underlying asset is recovered. We therefore support the IASB in its efforts to address the issue.
However, EFRAG disagrees with the use of an exception to the measurement principles in IAS 12 to resolve the issue. In EFRAG´s view, the issue should be addressed by extending application guidance on the measurement principle, because we believe it would be clearer and would produce the right answer based on the ‘manner of recovery’ of the underlying asset.
Press release
© EFRAG - European Financial Reporting Advisory Group
