Deferred tax liabilities

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Last update 07/08/2019

A deferred tax liability shall be recognised when there is a taxable temporary difference between the tax base of an asset or liability and its corresponding carrying amount in the statement of financial position. This arises when the carrying amount of an asset exceeds its tax base. Consequently, the future recovery of the carrying amount will generate taxable profit; e.g:

  • accumulated depreciation of an asset in the financial statements is less than the cumulative depreciation allowed up to the reporting date for tax purposes, e.g. depreciation of an asset is accelerated for tax purposes;
  • development costs have been capitalised and will be amortised to the statement of comprehensive income but were deducted in calculating taxable amounts in the reporting period in which they were incurred.

A deferred tax liability shall be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from:

  1. the initial recognition of goodwill; or
  2. the initial recognition of an asset or liability in a transaction which:
    1. is not a business combination; and
    2. at the time of the transaction, affects neither accounting
      profit nor taxable profit (tax loss).

An entity shall recognise a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the following conditions are satisfied:

  1. the parent, investor, joint venturer or joint operator is able to control the timing of the reversal of the temporary difference; and
  2. it is probable that the temporary difference will not reverse in the foreseeable future.

Temporary differences

Temporary differences differences between the carrying amount of an asset or liability in the statement of financial position and its tax base. Temporary differences may be either:

  • taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled
  • deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

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Deferred tax liabilities
Deferred tax liabilities

Deferred tax liabilities

Deferred tax liabilities

Deferred tax liabilities Deferred tax liabilities Deferred tax liabilities Deferred tax liabilities Deferred tax liabilities

 

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