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Chapter 12

2.3 Recognition

Deferred tax should be recognised on all taxable temporary differences unless it
results from the recognition of goodwill for which amortisation is not tax deductible.

Deferred tax should be recognised on all deductible temporary differences, bar the
exception above, as long as sufficient future profits will be available against which the
deductible difference can be utilised.

2.4 Measurement

To calculate the deferred tax balance, the temporary difference is multiplied by the
tax rate in force (or expected to be in force) when the asset is realised or the liability
is settled.

Deferred tax assets and liabilities should not be discounted to present value.

When accounting for deferred tax, the entity accounts for the year-on-year movement
in the deferred tax asset or liability. This is normally recorded in profit or loss:

Dr Deferred tax (SFP) X OR Dr Tax expense (P/L) X

Cr Tax expense (P/L) X Cr Deferred tax (SFP) X

However, if the item giving rise to deferred tax is recorded in OCI, then
the related deferred tax income or expense should also be recorded in
OCI.

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