IAS 12Chapter 6Lesson 1
Investments: controlling the timing of reversal
Step 1 of 8Learning objectives
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The carrying amount of an investment (share of a subsidiary's net assets, including goodwill) often differs from its tax base, for example because of undistributed profits. A deferred tax liability is recognised on these taxable differences, unless the investor controls the timing of reversal and it is probable that the difference will not reverse in the foreseeable future — the typical situation of a parent controlling its subsidiary's distributions, but not of an investor in an associate. An asset is recognised only if the deductible difference will reverse in the foreseeable future. The amount of unrecognised differences is disclosed.
Learning objectives
- Identify the origin of temporary differences relating to investments.
- Determine whether a deferred tax liability is recognised on an investment (control of timing and no foreseeable reversal).
- Distinguish a subsidiary from an associate with regard to control of distributions, and calculate the tax on expected distributions.
- Justify the position taken and the disclosure of unrecognised differences.