The Interpretations Committee considered the comments received on the proposed amendment to clarify the accounting for deferred tax assets for unrealised losses.
The Interpretations Committee recommends that IAS 12 is amended to clarify the accounting for deferred tax assets for unrealised losses.
The Interpretations Committee noted, however, that the comments received on the proposed amendment raised questions about two matters that require further analysis and decision:
- whether an unrealised loss on a debt instrument measured at fair value gives rise to a deductible temporary difference when the holder expects to recover the carrying amount of the asset by holding it to maturity and collecting all the contractual cash flows; and
- whether an entity can assume recovery of an asset for more than its carrying amount when estimating probable future taxable profits against which deductible temporary differences can be utilised (see paragraph 24 of IAS 12).
The Interpretations Committee recommends that these two issues are resolved. However, it was not clear at this stage whether resolving these two issues could be achieved within the constraints of the Annual Improvements process, or whether this work would need to be undertaken as a narrow-scope amendment to IAS 12. Before commencing work on these two matters, the Interpretations Committee decided to consult with the IASB on the most appropriate path forward.
The staff will bring the Interpretations Committee’s question to a future IASB meeting.