IAS 12Chapter 5Lesson 1
Probable taxable profit: three sources, restrictions and tax planning
Step 1 of 8Learning objectives
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A deferred tax asset is only worth something if taxable profits will allow the deductions to be used. The standard recognises three sources: taxable differences reversing in the same periods (same authority, same entity), probable future taxable profits excluding reversal deductions, and tax planning opportunities. If the law restricts the use of certain losses to one type of income, the analysis is done by type. The estimate may include recovering assets for more than their carrying amount if sufficient evidence supports it.
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Learning objectives
- Identify the sources of taxable profit that justify a deferred tax asset (same authority, same entity, same periods).
- Calculate the recognisable asset from taxable differences and future profit excluding reversal deductions.
- Assess a tax planning opportunity and recovering an asset for more than its carrying amount.
- Analyse the effect of a legal restriction on use by type of income.