CERTYNEX IFRS ACADEMY

Valdoris capitalises 300,000 of development costs (accounting treatment in the case), which the tax law (data) allows it to deduct in full in the same year. Its accountant records no deferred tax, citing the initial recognition exception. Where is the error?

There is no error: this is the initial recognition of an asset, which the exception covers whatever the tax treatment of the costs.

The deferred tax should have been charged directly to equity.

A deferred tax asset was needed, the tax base being higher.

The immediate deduction affects taxable profit: the exception does not apply and a deferred tax liability is recognised.