On 11 August 2022, the amendments to IAS 12 Income Taxes titled Deferred Tax related to Assets and Liabilities arising from a Single Transaction were endorsed by the European Commission for use in the European Union. The EU effective date is the same as the IASB’s effective date (annual periods beginning on or after 1 January 2023).
Amendments to IAS 12 were issued in May 2021 to clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations.
The amendments to IAS 12 provide a further exception from the initial recognition exemption. Under the amendments, an entity does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences. For example, this may arise upon recognition of a lease liability and the corresponding right-of-use asset applying IFRS 16 Leases at the commencement date of a lease.
In these cases, an entity is required to recognise the related deferred tax asset and liability, with the recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12.
We brought more information about these amendments to IAS 12 in our article IASB published amendments to IAS 12.