This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IAS 12 — Interest and penalties

Date recorded:


In March 2017, the IC discussed whether it should add a project onto its agenda regarding how income tax-related interests and penalties should be accounted for. The research performed by the Staff then did not indicate widespread diversity in how such interests and penalties are accounted for, nor that it has a material effect on the amounts reported by entities. The IC concluded that it was not a high priority project and decided not to add this project onto its agenda.

Staff analysis on comment letters received

Five comment letters were received: three agreed with not adding the issue onto the IC’s agenda and two disagreed. Those who disagreed believed that the IC should address the diversity in practice. A few respondents also suggested that the IC provide guidance on assessing whether such an interest or penalty is an income tax that falls within the scope of IAS 12 (failing which such items would be accounted for under IAS 37), especially in instances when a single amount including tax, interest and/or penalty is agreed as a lump sum with the tax authorities and it is difficult to split them into the different components.

The Staff conducted further research and concluded that there is not sufficient evidence of a widespread diversity in practice, nor that the amounts recognised for these balances are material enough to warrant standard-setting activities. The Staff also note that based on the feedback received from the 2015 Agenda Consultation, the Board decided not to add any project on IAS 12 onto its agenda (narrow-scope or a wider project) because it was not considered a high priority compared to other more pressing issues. The Staff also believe that adding any guidance on the assessment of whether such interests and penalties are income taxes would be beyond the scope of an agenda decision.

Staff recommendation

In light of the above, the Staff recommend that the IC not add a project onto its agenda regarding the accounting of income tax-related interests and penalties, and to finalise the agenda decision.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.