Recognition of an impairment loss creates a deferred tax asset
An entity has an asset with a carrying amount of €2,000 whose recoverable amount is €1300. The tax rate is 30% and the tax base of the asset is €1,500. Impairment losses are not deductible for tax purposes. The effect of the impairment loss is as follows:
|
Before impairment |
Effect of mpairment € |
After impairment |
|
|
Carrying amount |
2,000 |
(700) |
1,300 |
|
lax base |
1,500 |
1,500 |
|
|
Taxable (deductible) temporary difference |
500 |
(700) |
(200) |
|
Deferred tax liability (asset) at 30% |
150 |
(210) |
(60) |
The entity will recognise the deferred tax asset to the extent that the respective recognition criteria of IAS 12 are met.