CFA Level I · CFA Level I Exam · Analysis of Income Taxes
Under IFRS, a company with unused tax losses assesses whether to recognize a deferred tax asset for them. The deferred tax asset is most likely recognized to the extent that:
Under IFRS, a deferred tax asset for unused tax losses is recognized only to the extent that it is probable that future taxable profit will be available against which the losses can be used. Loss timing or lack of an expiry date is not sufficient.
- Athe losses were incurred in the most recent fiscal year
- Bit is probable that future taxable profit will be available against which the losses can be usedCorrect
- Cthe tax authority has not set an expiry date for the losses
Explanation
IFRS permits recognition of a deferred tax asset for unused tax losses only to the extent that it is probable that future taxable profit will be available to use them. Recency of the loss and the absence of an expiry date do not by themselves support recognition, since the key test is the likelihood of future taxable profit.
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