EBA · 2013_258 Final Q&A

Applicable basis for determining deferred tax assets to be deducted from CET1

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
36, para. 1
Topic
Own funds
Submitted by
Accounting firm
Submitted
2013-09-17
Answered
2014-04-30
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Is the amount of deferred tax assets and liabilities relevant for the calculation of the amount to be deducted from Common Equity Tier 1 (CET1) according to Article 36(1)(c) of Regulation (EU) No. 575/2013 (CRR) to be determined based on the accounting values of deferred tax assets and liabilities as disclosed in the balance sheet?

Background

According to Article 36(1)(c) of the CRR, deferred tax assets that rely on future profitability have to be deducted from CET1. According to Article 4(1)(106) and (108) of the CRR, deferred tax assets (DTA) and deferred tax liabilities (DTL) have the same meaning as under the applicable accounting framework; in Germany the German GAAP, Handelsgesetzbuch (HGB). With regard to the disclosure of deferred taxes on the balance sheet, institutions have - according to German GAAP - the discretion to apply two alternative approaches: 1. obligatory disclosure of a net surplus of DTL after netting gross DTA and gross DTL; optional disclosure of a net surplus of DTA after netting gross DTA and gross DTL, or 2. showing both the gross DTA and gross DTL on their balance sheet.

Answer

The amount of Deferred Tax Assets (DTA) to be deducted from Common Equity Tier 1 according to Article 36(1)(c) of Regulation (EU) No. 575/2013 (CRR) is the amount before any accounting netting (see Article 38(2) of the CRR). The only applicable netting rules for the purposes of this deduction are laid down in Article 38 of the CRR, in particular paragraphs 3, 4 and 5. The amount of net DTA calculated under the conditions of Article 38 of the CRR is independent of the relevant accounting framework (IFRS or national GAAP).

Original source: European Banking Authority, Q&A ID 2013_258

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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