4.13 Deferred Taxes

As shown in the table in Section 4.3.1, DTAs and DTLs are classified as monetary accounts. Typically, an entity files its income tax return in the local currency of the jurisdiction in which it operates. Further, an entity’s tax basis in assets and liabilities is generally determined in the local currency; accordingly, deferred taxes are typically measured in the local currency. Therefore, if an entity’s functional currency is different from the currency in which the entity has to pay taxes, deferred taxes must be remeasured in each reporting period at the current exchange rate. See Chapter 8 for further considerations related to accounting for income taxes.