IAS 12 – Income Taxes recognises both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of an entity’s assets and liabilities.
The difference between the tax base of assets and liabilities and the carrying amount is what is referred to as deferred tax.
Now, the Taxman allows Income Tax losses to be offset against future profits over a maximum period of 10 years.
Such unused tax losses are by default deferred tax assets because they offset future tax liabilities and therefore should be offset against the Deferred Tax Assets.
Eddy – CPA, MBA