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Levies — Education session (IASB only)

Date recorded:

The IASB received a report on the IFRS Interpretations Committee's (the Committee) recent discussions on the May 2012 draft Interpretation on accounting for levies charged by public authorities on entities that participate in a specific market. That particular draft Interpretation proposes guidance to clarify when a liability should be recognised for levies that are conditional on certain relevant factors.

At its November 2012 meeting, the Committee discussed the comments received on the draft Interpretation. The purpose of the report to the IASB was to inform the IASB of the divided views received on the draft Interpretation. Almost all respondents to the draft Interpretation agreed that it was a correct analysis of the requirements in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. However, approximately half of the respondents disagreed with the outcome of the proposed accounting; claiming that it would not reflect the substance of the transactions. In particular, concerns were raised regarding a failure to accrue levy expenses in interim periods in circumstances where the obligating event that gives rise to a liability occurs at a point in time (e.g., at the end of the year).

The IASB acknowledged the concerns raised to the draft Interpretation. Two Board members referred to previous Board discussions on this topic in February 2012, in which the IASB discussed the question of the recognition in interim financial statements of levies subject to a threshold. Drawing from those discussions, both Board members supported a principle where an entity accrues levy expenses subject to a threshold progressively as the entity makes progress towards the threshold provided it is probable that the threshold will be met. Thus, these Board members believed that draft Interpretation should include within its scope the question of interim reporting of levies in response to both constituent feedback and general views of the Board taken during its February 2012 meeting. The staff noted that the Committee intends to reconsider this issue at a future meeting based on constituent feedback received.

The IASB was not asked to make any decisions at this meeting. However, the staff noted that it would take the above views to the Committee for consideration. The Committee intends to continue its redeliberations of the draft Interpretation at its January 2013 meeting.

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