The International Accounting Standards Board (IASB) has published an exposure draft proposing a limited amendment to ‘IAS 12 Income Taxes’. Currently the standard requires that the measurement of deferred tax liabilities and deferred tax assets should reflect the tax consequences that follow the manner in which an entity expects to recover or settle the carrying amount of its assets and liabilities, i.e. by recovering the asset either by using it or by selling it. The amendment proposes an exception to this principle in certain specified circumstances that the measurement should reflect a rebuttable presumption that the carrying amount of the underlying asset will be recovered entirely by sale. The circumstances specified are where:
a) an entity applies the fair value model in IAS 40 Investment Property; or
b) an entity applies the revaluation model in IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets
The presumption is rebutted only when an entity has clear evidence that it will consume the asset’s economic benefits throughout its economic life.
The exposure draft is open for public comments till 9 November 2010.
