Deferred Tax Under FRS 102: How It Differs From IAS 12

Deferred Tax in the UK GAAP Context

While IFRS-reporting entities follow IAS 12 for deferred tax, UK companies applying FRS 102 use Section 29 of FRS 102 — which takes a different approach to some aspects of deferred tax. Understanding both is important for finance professionals working across UK GAAP and IFRS reporting, and for those advising groups with a mix of IFRS and FRS 102 entities.

The Timing Difference vs Temporary Difference Approach

FRS 102 Section 29 uses a timing difference plus approach — broadly similar to IAS 12 but with some important practical differences. FRS 102 focuses on timing differences (differences between taxable profit and accounting profit that originate in one period and reverse in later periods) rather than the full temporary difference approach of IAS 12. In most situations the results are similar, but the theoretical framework differs.

Key Differences from IAS 12

Revaluation of fixed assets: Under IAS 12, revaluation of a non-depreciable asset (such as land) creates a temporary difference and hence a DTL even where there is no intention to sell. Under FRS 102, a DTL is only recognised where there is a binding agreement to sell — a significant practical difference for property companies. Unremitted earnings of subsidiaries: FRS 102 does not require recognition of deferred tax on unremitted earnings of subsidiaries unless a dividend has been accrued. Measurement: FRS 102 requires deferred tax to be measured at the average rate expected to apply and prohibits discounting (as does IAS 12).

Practical Implications of FRS 102 Triennial Review

The 2026 FRS 102 amendments (effective for periods beginning 1 January 2026) introduced significant changes to lease and revenue accounting. These changes may create new deferred tax balances — particularly the right-of-use asset and lease liability recognised under the new lease accounting provisions, which may have different tax bases.

Further Reading

• IAS 12 Deferred Tax Guide
• FRS 102 Update 2026
• Accounting Standards CPD

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