IASB issues amendments to IAS 12 to clarify accounting for deferred tax on leases and decommissioning obligations

The IASB has issued amendments to IAS 12 Income Taxes to specify how companies should account for deferred tax on transactions such as leases and decommissioning obligations.

In certain specified circumstances, IAS 12 provides an exemption to entities from recognising deferred tax when they recognise assets or liabilities for the first time. However, there was 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 now clarify that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition and entities 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. 

The press release by IASB on the amendment may be accessed here.