IAS 12Chapter 7Lesson 2
The expected manner of recovery: use or sell?
Step 1 of 8Learning objectives
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Deferred tax reflects the way the entity expects to recover the carrying amount of its assets. When the law taxes use and sale differently (rate, tax base or both), the rate and base consistent with the expected manner are used. Revalued land, which is not depreciated, is deemed recovered through sale. Investment property at fair value is presumed recovered through sale, unless it is depreciable and held to consume substantially all its benefits over time.
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Learning objectives
- Determine the rate and tax base consistent with the expected manner of recovery.
- Calculate the deferred tax of revalued land and of investment property at fair value under the sale presumption.
- Assess whether the presumption of recovery through sale is rebutted.