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IAS 1 — Presentation of liabilities or assets related to uncertain tax treatments

Date recorded:

Background

The Committee received a submission about whether an entity, in its statement of financial position, presents a liability related to uncertain tax treatments as a current (or deferred) tax liability or as a provision.

Staff analysis

The staff analyse that IFRIC 23 is intended to clarify the application of recognition and presentation requirements in IAS 12 (including how an entity determines taxable profit, tax bases, unused tax loss, unused tax credits and tax rates) when there is uncertainty over income tax treatments. Accordingly, the calculation of taxable profit on which current tax, as defined in IAS 12, is calculated is the taxable profit that reflects any uncertainty applying IFRIC 23. Based on the disclosure requirements set out in IAS 1:54 & 57, which lists items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position, the staff analyse that the current tax liability that includes the uncertain tax liability under IFRIC 23 shall be presented on the statement of financial position, and the uncertain tax liability under IFRIC 23 shall not be disaggregated or aggregated with provisions that are within the scope of IAS 37. The same logic applies to uncertain tax assets. The staff also observed that if the presentation of uncertain tax liabilities or assets separately from other tax liabilities or assets would be relevant to an understanding of its financial position, an entity would disaggregate the line items required by IAS 1:54(n) & (o) to present uncertain tax liabilities or assets separately from other tax liabilities or assets (IAS 1:55).

Staff recommendation

The staff recommended that a tentative agenda decision be issued stating that the Committee's concluded that IFRS Standards provide an adequate basis to determine the presentation of uncertain tax liabilities and assets. 

Discussion

Before going into discussion, a Committee member highlighted that in his jurisdiction, some uncertain tax liability are disclosed as 'provisions'. Most of the Committee members agreed that IFRIC 23 is addressing recognition and measurement issues which serves as additional guidance on measurement requirements of IAS 12. IAS 12 has not changed in any aspects, including disclosure. One Committee member considered the uncertain tax treatment is in substance a contingency and cannot coincide with the definition of current tax recoverable or payable as set out in IAS 12 and opined that it is not entirely clear in IAS 12.

A Committee member questioned about the disaggregation criteria as set out in the tentative agenda decision. Some other Committee members agreed that it may be applicable in some scenarios but this will raise the issue of 'unit of account' and therefore suggested to remove it.

The Committee decided, by a majority of votes, not to add the matter to the standard-setting and to adopt the tentative agenda decision.

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.