CERTYNEX IFRS ACADEMY

Tirenne, lessee of a store lease, recognises at the commencement date a right-of-use asset and a lease liability of 540,000 each. Lease payments are deductible only when paid (tax data). Its accountant recognises no deferred tax, citing the initial recognition exception. Where is the error?

Only a deferred tax liability should have been recognised: the asset arising on the lease liability remains prohibited by the initial recognition exception.

There is no error: a lease does not affect profit at the commencement date.

The equal taxable and deductible differences rule out the exception: deferred tax asset and liability are recognised.

A deferred tax expense on 540,000 should have been recognised.