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Commission Regulation (EC) No 1725/2003 of 29 September
2003 adopting certain international accounting standards
in accordance with Regulation (EC) No 1606/2002 of the
European Parliament and of the Council.
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Income taxes - recovery of revalued
non-depreciable assets
Paragraph 11 of IAS 1 (revised 1997), presentation of
financial statements, requires that financial statements
should not be described as complying with International
Accounting Standards unless they comply with all the
requirements of each applicable standard and each applicable
interpretation issued by the Standing Interpretations
Committee. SIC interpretations are not intended to apply to
immaterial items.
Draft interpretation SIC-D21, income taxes - omnibus was
issued for comment in September 1999. The draft interpretation
included both the issue addressed in this interpretation and
the issue included in interpretation SIC-25, income taxes -
changes in the tax status of an enterprise or its shareholders.
Reference: IAS 12, income taxes (revised 1996).
Issue
1. Under IAS 12.51, the measurement of deferred tax
liabilities and assets should reflect the tax consequences
that would follow from the manner in which the enterprise
expects, at the balance sheet date, to recover or settle the
carrying amount of those assets and liabilities that give rise
to temporary differences.
2. IAS 12.20 notes that the revaluation of an asset does
not always affect taxable profit (tax loss) in the period of
the revaluation and that the tax base of the asset may not be
adjusted as a result of the revaluation. If the future
recovery of the carrying amount will be taxable, any
difference between the carrying amount of the revalued asset
and its tax base is a temporary difference and gives rise to a
deferred tax liability or asset.
3. The issue is how to interpret the term "recovery" in
relation to an asset that is not depreciated (non-depreciable
asset) and is revalued under paragraph 29 of IAS 16 (revised
1998).
4. This interpretation also applies to investment
properties which are carried at revalued amounts under IAS
25.23(b) but would be considered non-depreciable if IAS 16
were to be applied.
Consensus
5. The deferred tax liability or asset that arises from the
revaluation of a non-depreciable asset under IAS 16.29 should
be measured based on the tax consequences that would follow
from recovery of the carrying amount of that asset through
sale, regardless of the basis of measuring the carrying amount
of that asset. Accordingly, if the tax law specifies a tax
rate applicable to the taxable amount derived from the sale of
an asset that differs from the tax rate applicable to the
taxable amount derived from using an asset, the former rate is
applied in measuring the deferred tax liability or asset
related to a non-depreciable asset.
Date of consensus: August 1999.
Effective date: This consensus becomes effective on 15 July
2000. Changes in accounting policies should be accounted for
according to the transition requirements of IAS 8.46.
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