IAS12 - DTA DTL

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Leo
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IAS12 - DTA DTL

Post by Leo »

Hi everyone,

Company A is a biotech company which is still in the incubation phase, so it is structurally at loss. This company does not recognize any DTA & DTL even thought it has IFRS16, IAS19 etc... NB : it doesn't project any profit in the coming years so no DTA on tax loss either.

What's the reason to not recognize any DTA or DTL, I know this is written somewhere in IAS12 but can't find it somehow.

Thank you for your help !

Best regards !
JRSB
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Re: IAS12 - DTA DTL

Post by JRSB »

DTA is because not likely to be profits to set the losses or deductions against, so in effect any asset isn't 'recoverable' through lower tax later etc.

Not sure why wouldn't be DTL in your case - though there are specific cases where DTL doesn't arise when it otherwise might.
Leo
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Re: IAS12 - DTA DTL

Post by Leo »

For the DTA on tax losses not recognised because of lack of projection on future profit, it is understood. But this isn't the only source of DTA. And I have in mind a rule that says DTL shouldn't exceed DTA. Something like that, but can't remember in which context.
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Marek Muc
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Re: IAS12 - DTA DTL

Post by Marek Muc »

See the last paragraph in this section:

https://ifrscommunity.com/knowledge-bas ... the-future
JRSB
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Re: IAS12 - DTA DTL

Post by JRSB »

That would be a reason why there is an asset, rather than why there is not?
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Marek Muc
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Re: IAS12 - DTA DTL

Post by Marek Muc »

That's the reason why you can have a net deferred tax amounting to zero in balance sheet. But they should keep track of gross amounts of DTA and DTL. For example, there are disclosure requirements with respect to unrecognised DTA
Leo
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Re: IAS12 - DTA DTL

Post by Leo »

Hi Marek,

Thank you for your clarification, it's very clear.

I'd just like to ask a practical questions :

At year 1, Company A recognized DTA related to provision of risks (because this provision is only deductible at payment, thus creating a temporary differences). And at year 2, Company A think it can't be profitable in the coming years. What should we do about this DTA ? We certainly can't depreciate it because depreciation only works on DTA recognized on tax losses am I correct?
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Marek Muc
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Re: IAS12 - DTA DTL

Post by Marek Muc »

no, you're not correct :)

see IAS 12.56
An entity shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised.
Leo
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Re: IAS12 - DTA DTL

Post by Leo »

Right, ok !

Thank you !
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