Question

Under IFRS, which of the following statements regarding deferred income taxes is true?

A. The tax basis of a lawsuit accrual is the estimated amount of the settlement/judgment.
B. For a lessee, the tax basis of both the lease liability and leased right-of-use asset is nil.
C. The accounting basis of a loss carryforward is the amount of the non-capital loss that may be carried forward.
D. The tax basis of a warranty liability is the amount recorded on the statement of financial position.

Answer 1

Under IFRS, statement B is correct as it is typical for the tax basis of both the lease liability and leased right-of-use asset to be considered nil for lessees.

Step-by-step explanation:

Under IFRS, deferred income taxes are accounted for based on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Among the given options, statement B is true. For a lessee, under IFRS 16 'Leases', the tax basis of both the lease liability and leased right-of-use asset is generally considered to be nil because they are not recognized for tax purposes. This is in contrast with the financial accounting where a right-of-use asset and a corresponding lease liability are recognized on the balance sheet.

Answer: B. For a lessee, the tax basis of both the lease liability and leased right-of-use asset is nil.