Amending standard AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax : Recovery of Underlying Assets’ has recently been issued and will act to amend AASB 112 ‘Income Taxes’ and replace the requirements contained in Interpretation 121 ‘Income Taxes – Recovery of Revalued Non-Depreciable Assets.’ 

The amendments are mandatorily effective for annual reporting periods beginning on or after 1 January 2012 but are available for early adoption.

The general principle for deferred taxes contained in AASB 112 is to have regard to the expected manner in which the carrying amount of assets or liabilities are to be recovered or settled.  This consideration is necessary in jurisdictions, such as Australia, where entities may be impacted by different tax rates and rules (e.g. capital gains tax regime), depending upon what an entity intends to do with an asset or liability.

AASB 2010-8 has the effect of amending this principle with respect to non-depreciating assets that are measured using a revaluation model in either AASB 116 Property, Plant & Equipment or AASB 140 Investment Property.

For revalued investment property, there is now a rebuttable presumption that the carrying amount will be recovered through a future sale. The presumption may be rebutted if the investment property is held within a business model where the objective is to consume substantially all of the economic benefits embodied in the asset of time, as opposed to a sale. This would only be applicable for the building components of the asset as carrying values of land are generally not consumed.

The amendments also incorporate consistent principles applicable to other non-depreciable assets such as land accounted for under AASB 116 and which are carried under a revaluation model by virtue of inclusion of the guidance in Interpretation 121.


Contact

Rob Mackay
T +61 3 8635 1800
rmackay@moorestephens.com.au

www.moorestephens.com.au