medium · Financial Accounting accounting-cycle-financial-statements

Under IFRS (IAS 12), how does the approach to deferred tax assets differ from US GAAP (ASC 740) regarding the use of a valuation allowance?

1. IFRS does not use a valuation allowance; instead, it only recognizes a DTA to the extent that it is probable it will be realized.
2. IFRS requires an allowance only for net operating loss carryforwards, while GAAP applies one to all temporary differences.
3. IFRS applies a 'probable' recognition threshold, whereas GAAP explicitly uses a 'more likely than not' realization threshold.
4. IFRS allows discounting deferred tax assets and liabilities to present value using a risk-adjusted rate, which GAAP prohibits outright.

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