Amendments for Deferred Tax related to Assets and Liabilities arising from a Single Transaction

Friday, July 2, 2021

The AASB issued AASB 2021-5 to clarify the accounting for deferred tax on transactions that, at the time of the transaction, give rise to equal taxable and deductible temporary differences.

In specified circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time.

AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction clarifies that the exemption does not apply to transactions for which entities recognise both an asset and a liability and that give rise to equal taxable and deductible temporary differences. This may be the case for transactions such as leases and decommissioning, restoration and similar obligations. Entities are required to recognise deferred tax on such transactions.

The amendments apply to annual reporting periods beginning on or after 1 January 2023, but can be adopted for earlier reporting periods.