E.4 Tax Laws or Rates for Measuring DTAs and DTLs
Under U.S. GAAP, DTAs and DTLs are measured by using the enacted tax
laws or rates only. ASC 740-10-25-47 states that “[t]he effect of a change in tax
laws or rates shall be recognized at the date of enactment.” Accordingly, the effect
of a change in tax laws or rates on DTAs and DTLs should be recognized on the date
on which the change is enacted. See Section
3.5.1 for additional guidance.
Under IFRS Accounting Standards, DTAs and DTLs should be measured on
the basis of tax laws or rates that have been enacted or substantively
enacted by the balance sheet date at the amount that is expected to apply
when the liability is settled or the asset is realized. Paragraph 48 of IAS 12
states:
Current and deferred tax assets and liabilities are
usually measured using the tax rates (and tax laws) that have been enacted.
However, in some jurisdictions, announcements of tax rates (and tax laws) by the
government have the substantive effect of actual enactment, which may follow the
announcement by a period of several months. In these circumstances, tax assets
and liabilities are measured using the announced tax rate (and tax laws).