Final answer:
Under IFRS, 'probable' suggests more likelihood than not, without a strict percentage threshold. A company must consider all evidence to determine the realizability of deferred tax assets and must re-evaluate these assets at every period end.
Step-by-step explanation:
Understanding the Term 'Probable' in IFRS
Under the International Financial Reporting Standards (IFRS), the term probable does not have a quantified threshold such as 'at least slightly more than 60%'. The definition is more subjective and requires professional judgment. When the IFRS refers to something as probable, it generally means that the event is more likely than not to occur, which could be interpreted as having a greater than 50% chance. Nevertheless, in accounting, this probability may often be considered in a more conservative light, meaning the threshold for recognition might be set higher in practice.
Regarding deferred tax assets under IFRS, a company should assess whether it is probable that sufficient taxable profit will be available in the future against which the deductible temporary difference can be utilized. This involves considering both positive and negative evidence available. If, based on the evidence, it seems likely that all or part of the deferred tax asset will not be realized, then the amount of the recognized deferred tax asset is reduced by setting up a valuation allowance.
It is also required that deferred tax assets be evaluated at the end of each accounting period to determine whether they are still recoverable. This is to ensure that their carrying amount is appropriate in view of the likelihood of their future realization.