IASB clarifies accounting for deferred tax in IAS 12, Income Taxes

The International Accounting Standards Board (IASB) issued Friday “targeted amendments” to IAS 12, Income Taxes, to specify how companies should account for deferred tax on transactions such as leases and decommissioning obligations.

The aim of the amendments — Deferred Tax Related to Assets and Liabilities Arising From a Single Transaction (access requires IASB subscription) — is to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations, the IASB said.

The board said that IAS 12, Income Taxes, “specifies how a company accounts for income tax, including deferred tax, which represents tax payable or recoverable in the future”.

It explained: “In specified circumstances, companies are exempt from recognising deferred tax when they recognise assets or liabilities for the first time.

“Previously, there had been some uncertainty about whether the exemption applied to transactions such as leases and decommissioning obligations — transactions for which companies recognise both an asset and a liability.

“The amendments clarify that the exemption does not apply and that companies are required to recognise deferred tax on such transactions.”

The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.

Oliver Rowe ( is an FM magazine senior editor.