2.11 The conceptual basis of FRS 19 is that of recognising a liability when it arises: no liability arises when a property is revalued as this does not trigger a tax charge. Such a charge only arises on sale. With IAS 12 the central concept is that of ultimate realisation: every asset will be realised over time, either by consumption as its value is gradually used up, or by disposal. The recognition of temporary differences under IAS 12 is based on this theme of ultimate realisation. 2.12 It can therefore be seen that IAS 12 has a broader compass: it picks up many of the liabilities which are the concern of tax warranties, such as tax base costs of assets which are lower than the book amounts.
2.13 The discounting of deferred tax liabilities is not permitted under IAS 12.
3 Timing Differences
3.1 We have already introduced some of the more common timing differences, namely:
3.1.1 the difference between depreciation of fixed assets and the tax allowances given;
3.1.2 taxed provisions, that is provisions in the accounts which are not deductible for tax purposes;
3.1.3 tax losses carried forward to a later period.
3.2 There are several other types of timing difference and we will examine some of these below.
3.3 If interest is capitalised as part of the cost of a fixed asset, or as part of the cost of stock, such as on a large building project, it is still deductible for tax purposes as if it had been charged directly to the profit and loss account. Such interest is therefore a timing difference: the tax benefit arising from the interest expense has to be deferred in the same way that the cost of the interest has been deferred. As the fixed asset is then depreciated, this timing difference effectively reverses, as the interest is then effectively charged to the profit and loss account by means of an increased depreciation charge. A similar concept applies to the stock: at the point when the cost of the stock, including the interest component, is recognised in the profit and loss account as a component of cost of sales, then the timing difference reverses. 3.4 It is very possible that smaller items of capital expenditure may be written off to repairs. If this happens it is necessary for the repair cost to be disallowed, and for capital allowances to be claimed instead. This is therefore another type of timing difference affecting fixed assets.
3.5 With defined benefit pension schemes (more commonly known as final salary schemes) there is a requirement under FRS 17 to include on the balance sheet the
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