Deferred tax in business combinations

[DanSal]

Hi all

I am confused in the treatment of Deferred tax arising in business combination

When adjusting net assets of subsidiary to fair value, a temporary dif. arises if the tx base is cero

So goodwill will increase to recognise the DTL

Hence, is this deferred tax liability recognised or not? Reading here and the standard, it says that it should not because initial recognition exemption applies but i have seen examples that recognise this temp. Dif

Thanks

[Marek Muc]

You're mixing up deferred tax recognised on fair value adjustments with deferred tax arising on goodwill.

[DanSal]

Hi Marek

Thanks - can you explain the difference please? Or give me
More details?

Thanks

[Marek Muc]

Refer to the example in this section:
https://ifrscommunity.com/knowledge-bas ... g-goodwill

[DanSal]

Apologies I couldn’t find deferred tax arising in goodwill

Would you copy and paste here please?

Thanks

[Marek Muc]

That's because deferred tax isn't recognised on goodwill
https://ifrscommunity.com/knowledge-bas ... d-goodwill

[DanSal]

Thanks Marek

So to make it clear - deferred tax is not recognised for goodwill

But

We recognise deferred tax for the fair value of the net assets of the sub. When calculating goodwill, Which in turns increases goodwill (in case carrying amounts were higher than tax base)

Is that the case?

[JRSB]

Yes