Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p53
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 53/61)
Character Range: 177272–180505

law.

General

On 31 December 20X1, Entity Z has, from other sources, taxable temporary differences of CU50,000 and deductible temporary differences of CU430,000, which will reverse in ordinary taxable profit (or ordinary tax loss) in 20X2.

At the end of 20X1, it is probable that Entity Z will report to the tax authorities an ordinary tax loss of CU200,000 for the year 20X2. This tax loss includes all taxable economic benefits and tax deductions for which temporary differences exist on 31 December 20X1 and that are classified as ordinary by tax law. These amounts contribute equally to the loss for the period according to tax law.

Entity Z has no capital gains against which it can utilise capital losses arising in the years 20X1–20X2.

Except for the information given in the previous paragraphs, there is no further information that is relevant to Entity Z's accounting for deferred taxes in the period 20X1–20X2.

Temporary differences

At the end of 20X1, Entity Z identifies the following temporary differences:

                   Carrying amount (CU)        Tax base      Taxable temporary differences (CU)     Deductible temporary differences (CU)
                                               (CU)

Debt Instrument A  1,942,857                   2,000,000                                            57,143
Debt Instrument B  778,571                     750,000       28,571
Debt Instrument C  1,961,905                   2,000,000                                            38,095
Other sources                Not specified     50,000        430,000

The difference between the carrying amount of an asset or liability and its tax base gives rise to a deductible (taxable) temporary difference (see paragraphs 20 and 26(d) of the Standard). This is because deductible (taxable) temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base, which will result in amounts that are deductible (taxable) in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled (see paragraph 5 of the Standard).

Utilisation of deductible temporary differences

With some exceptions, deferred tax assets arising from deductible temporary differences are recognised to the extent that sufficient future taxable profit will be available against which the deductible temporary differences are utilised (see paragraph 24 of the Standard).

Paragraphs 28–29 of AASB 112 identify the sources of taxable profits against which an entity can utilise deductible temporary differences. They include:

     (a) future reversal of existing taxable temporary differences;

     (b) taxable profit in future periods; and

     (c) tax planning opportunities.

The deductible temporary difference that arises from Debt Instrument C is assessed separately for utilisation. This is because tax law classifies the loss resulting from recovering the carrying amount of Debt Instrument C by sale as capital and allows capital losses to be offset only against capital gains (see paragraph 27A of the Standard).

The separate assessment results in not recognising a deferred tax asset for