Under IFRS, when is a deferred tax asset recognized?

• A. Only when the tax rate is enacted
• B. When it is probable that sufficient taxable profit will be available for utilization.
• C. Whenever there is an expectation of future taxable income.
• D. Upon applying any estimated future tax rates to current differences.

Answer: (B)

A deferred tax asset is recognized under IFRS when it is probable that sufficient taxable profit will be available for the asset to be utilized. This probability requirement is crucial because it ensures that the recognition of the deferred tax asset is based on the expected future economic benefits that the entity will derive from it.

The concept of "probable" indicates that the likelihood of realizing the benefits is more than 50%. This includes considering the entity's past profitability, future forecasts, and any other relevant information that would support the future generation of taxable income. Therefore, the focus is on the entity's future earnings potential and its ability to use the tax benefits.

This approach differs from merely having an expectation or a generalized notion of future taxable income, reinforcing the need for a concrete assessment of the entity's future financial position to justify the recognition of a deferred tax asset.