Asset under construction and temporary difference

[JBHF]

Hi there,

I wonder if asset under construction should be included in the consideration of temporary difference?
Will it give raise to temporary difference?

[Ketan Marwah]

Hi,

What makes you think that you shouldn’t? It is after all an asset like any other asset so apply the following guidance to the case and decide whether you should be accounting for the temporary differences or not as it would depend on further facts of the case:

https://ifrscommunity.com/knowledge-bas ... ifferences

[Marek Muc]

... keeping the initial recognition exemption in mind https://ifrscommunity.com/knowledge-bas ... -exemption

[JRSB]

I suppose for an asset under construction, there will be a daily 'series' of IREs?

[Ketan Marwah]

Agreed but it is required to remain careful in assessing whether the differences are all attributed to initial recognition or subsequent recognition which is why further facts to the case is pivotal.

[Marek Muc]

It's also possible for expenditures to be immediately expensed under tax law while being capitalised under IFRS. In such scenarios, the initial recognition exemption doesn't apply.
@JBHF, could you please provide more details about the case you're looking at?

[JRSB]

What would be a subsequent event triggering recognition of deferred tax in this case? If the asset is completed, and is simply depreciated over its useful life, there will be no deferred tax recognised in my understanding.

[Marek Muc]

The triggering event here is when you incur the expenditure and recognise a tax expense. This creates a temporary difference, leading to the recognition of a deferred tax liability. This liability is then gradually 'utilised' over the IFRS depreciation period.