E.3 Recognition of DTAs
Under U.S. GAAP, ASC 740-10-30-5(e) states that DTAs are recognized in full and then
reduced “by a valuation allowance if, based on the weight of available evidence, it
is more likely than not (a likelihood of more than 50 percent) that some portion or
all of the deferred tax assets will not be realized.” The valuation allowance will
“reduce the deferred tax asset to the amount that is more likely than not to be
realized.” See Section 3.3.4 for additional
guidance.
Under IFRS Accounting Standards, DTAs are recognized only to the
extent that it is probable that they will be realized.
Therefore, under both sets of standards, DTAs are recognized at an
amount that is determined to be realizable on a more-likely-than-not basis. The only
difference is presentation (i.e., a valuation allowance is used under U.S. GAAP but
not under IFRS Accounting Standards).