Final answer:
Under IFRS, companies are required to recognize deferred taxes for temporary differences as per IAS 12, reflecting future tax charges or benefits and adhering to accrual accounting principles.
Step-by-step explanation:
Under International Financial Reporting Standards (IFRS), a company is indeed required to recognize deferred taxes when there are temporary differences between the tax base of assets or liabilities and their carrying amount in the financial statements.
The requirement for the recognition of deferred taxes is detailed in IAS 12, Income Taxes. Deferred tax liabilities are recognized for taxable temporary differences, while deferred tax assets are recognized for deductible temporary differences and the carryforward of unused tax losses and credits.
To account for these deferred taxes, the company must assess all temporary differences that may generate either a future tax charge or a future tax benefit. Recognizing deferred taxes ensures that the financial statements reflect the future tax consequences of those differences.
This principle is known as the temporary difference approach and reflects the ideals of accrual accounting, which aims to match income and expenses to the periods in which they are incurred, not just when they are paid or received.