Question

Many accounting standards (e.g. AASB16 Leases, AASB13 Fair value measurement) require entities to discount the value of assets and liabilities due/payable in the future. However Paragraph 53 of AASB 112 states that deferred tax assets and liabilities shall not be discounted. Do you agree with this requirement? Justify your answer.

Answer 1

Yes. It is true that the deferred tax assets and liabilities shall not be discounted or are not permitted for discounting. The reason for the same is that, the reliable determination of deferred tax assets and liabilities on a discounted basis requires detailed scheduling of the timing of the reversal of each temporary difference. In many cases such scheduling is impracticable or highly complex. Therefore, it is inappropriate to require discounting of deferred tax assets and liabilities. To permit, but not to require, discounting would result in deferred tax assets and liabilities which would not be comparable between entities. Therefore, this Standard (AASB-112) does not require or permit the discounting of deferred tax assets and liabilities.