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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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This SIC contains
amendments resulting from the adoption of Commission
Regulation (EC) No. 2238/2004 of 29 December 2004.
Income taxes - recovery of revalued
non-depreciable assets
Paragraph 11 of IAS 1 (revised
2004), 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
2004).
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 in accordance with paragraph 31 of IAS 16.
4. This
Interpretation also applies to investment properties that are
carried at revalued amounts under IAS 40.33 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 in accordance with IAS 16.31 shall be
measured on the basis of 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.
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 shall be accounted for in accordance with
IAS 8.
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