• Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 8/21/2014

EU - IASB proposals on deferred tax assets, unrealized losses 

August 21: The IASB on 20 August 2014 issued proposals that seek to address the fundamental question of what future taxable profit is, and whether a taxpayer is to recognize a deferred tax asset if the loss is unrealized.

The issue arose during the financial crisis. Stated another way, in a case where a taxpayer is holding a debt instrument that is falling in value, without a corresponding tax deduction, but on the due date, the taxpayer will receive the full nominal amount and for which there will be no tax consequences of that repayment—does that taxpayer recognize a deferred tax asset on this unrealized loss?

A detailed example in proposals issued by the IASB shows that the answer is “yes” provided that certain conditions are met, and this may be the case even if the bottom line is expected to be a loss.

Read an August 2014 report prepared by the KPMG member firm in the UK: Deferred tax assets on unrealised losses (2014/15)

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