DEFERRED TAXATION

[shakilbadar]

Dear Kamran and Bilal,

with due respect i would like to draw your attention to the initial recognition exemption provided by IAS 12 through paragraph 15 and 24.

As you both agree that the tax base of both finance lease liability and finance lease assets are nil at initial recognition (at least), so at initial recognition deferred tax asset/liability arising from finance lease liability shall be set off with deferred tax asset/liability arising from finance lease asset therefore, it shall have no impact on profit and loss.

hence, it qualifies for exemption provided by IAS 12 and no deferred tax asset/liability shall be recorded either at initial recognition or thereafter.

I hope you get my point i am quoting text from IAS 12 paragraph 15 for convenience

<b>Paragraph 15 of IAS 12 states</b>

“A deferred tax liability shall be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from…

(b) the initial recognition of an asset or liability in a transaction which

(i) is not a business combination; and

(ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss)….”


Regards,


Shakeel Badar