IAS 37 — Payments relating to taxes other than income tax

Date recorded:


In March the Committee discussed a request from the European Securities Market Authority (ESMA) to interpret IAS 37 in relation to payments relating to uncertain tax treatments that are outside the scope of IAS 12 Income Taxes (i.e. the payments are for taxes other than income tax). It relates to when an entity makes a voluntarily payment equal to the disputed amount to the tax authority in order to avoid possible penalties or interest.

The Committee agreed with the staff analysis that the payment made by the entity meets the definition of an asset. On making the payment, the entity has the right to receive future economic benefits either in a form of cash or by using the payment to settle the tax liability. The payment is not a contingent asset as defined by IAS 37 because it is an asset, and not a possible asset, of the entity.

The staff brought this back to consider whether the analysis should assess the nature of the transaction against the new definition of an asset in the revised Conceptual Framework or the definition of an asset in the IFRS Standards. The definitions are not aligned, and this is the first time such a situation has arisen.

The Committee agreed with the staff analysis and the conclusion that the new definition of an asset in the 2018 Conceptual Framework does not change the Committee’s previous conclusion on the issue. The Committee observed that there is no specific Standard that applies to the fact pattern. Hence, preparers are required to apply the hierarchy in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and thus refer to the definitions in the Conceptual Framework. However, many of the Committee members suggested to clarify in the tentative agenda decision that preparers should only look to the Conceptual Framework to determine whether an asset exists or not. The tentative agenda decision should remain silent on whether this asset is recognised and how the asset is measured, although one Committee member warned that this might increase diversity in practice. It was suggested that preparers look to similar IFRS Standards to determine an appropriate accounting policy for the recognition and measurement of this asset.

Development since the last Committee discussion

In response to the Committee’s decision, the staff prepared a paper for the Board to consider. In that paper, the staff analyse how requirements in IAS 1 Presentation of Financial Statements and IAS 8 determine the process for developing an accounting policy. In the absence of an IFRS Standard that either specifically applies to the asset of tax deposit or deals with similar issues, the staff’s previous conclusion that tax deposit gives rise to an asset by applying IAS 8 hierarchy and Conceptual Framework remains unchanged.

Staff recommendation

The staff recommend that the Committee not add this matter to its agenda and that the Committee should publish a tentative agenda decision to that effect.


A few Committee members agreed that the staff analysis has simplified a lot of complexities, particularly in paragraph 13(b) of the staff paper. That paragraph that states that the entity's management may refer to IFRS Standards (IAS 8 and Conceptual Framework) for assistance in developing policies for recognizing, measuring and presenting that asset and disclosing information about it. The Committee members also considered the justification of the accounting treatment for tax deposits by adopting the IAS 8 hierarchy and Conceptual Framework is convincing. A Committee member also considered the highlight of the disclosure requirements in the staff paper is useful because he expects to read from financial statements about tax deposits that are possible to offset future payments. The Committee decided, by a majority of votes, not to add this matter to its standard-setting agenda.

In respect of the proposed wording to the tentative Agenda Decision, a Committee member suggested to add some sub-headings (such as recognition of asset, measurement, presentation and disclosure of asset and etc.) to achieve a coherent presentation of the Agenda Decision. One of the Committee members considered the term "payments" in paragraph 1 of the Agenda Decision should be changed to "deposits" (i.e. amounts paid that are eligible for getting back in the future).


The Committee decided not to take this matter onto its agenda and to issue a tentative Agenda Decision.

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