Deloitte comment letter on Draft IFRIC Interpretation DI/2012/1 'Levies Charged by Public Authorities on Entities that Operate in a Specific Market'
We agree that the consensus in the draft Interpretation provides an appropriate analysis of the treatment of levies within its scope under current IFRSs and, in particular, of the application of the definition of a liability provided in IAS 37 to such items, although we are concerned that the draft Interpretation does not deal with levies that are due only if a minimum revenue threshold is achieved, that are calculated as a fixed amount or are based on a graduated rate calculation. An Interpretation dealing only with certain levies is not helpful to preparers and users confronted with levies outside its scope and could lead to different financial reporting treatments of transactions whose economic substance is very similar.
However, we believe that a significant factor in the requests made to the Committee on specific levies was concern over whether the treatment described in the draft Interpretation provides the most useful information about the economic resources of the entity. As a result, as noted in our response to the IASB’s Agenda Consultation 2011, and irrespective of whether the draft Interpretation is finalised or not, we would still encourage the Board to consider whether non-reciprocal transactions in general, and government levies in particular, are best dealt with by IAS 37 and whether an approach similar to the current tax requirements of IAS 12 could be developed to reflect better the nature of government levies.