IFRIC 21 Levies provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.  The Interpretation covers the accounting for outflows imposed on entities by governments (including government agencies and similar bodies) in accordance with laws and/or regulations.  However, it does not include income taxes, fines and other penalties, liabilities arising from emissions trading schemes and outflows within the scope of other Standards.  It is effective for annual periods beginning on or after 1 January 2014 although earlier application is permitted.

In order to advise the European Commission as to whether IFRIC 21 should be endorsed for use in the EU, EFRAG has provided their technical assessment of the Interpretation against the defined criteria for European Endorsement. 

EFRAG’s initial assessment is that IFRIC 21 satisfies the technical criteria for EU Endorsement and they will be recommending the Interpretation for endorsement.

EFRAG also considered whether implementing IFRIC 21 in the EU and the European Economic Area might result in additional costs for users and preparers and whether such costs outweighed the benefits to be derived from adoption.  EFRAG concluded that they do not feel there would be significant costs associated with application and the benefits would outweigh costs.

In evaluating IFRIC 21, EFRAG also considered whether:

• There is an issue that needs to be addressed
• If there is an issue that needs to be addressed, whether an Interpretation is an appropriate way of addressing it
• IFRIC 21 is a correct interpretation of existing IFRS.

For each of these additional considerations, EFRAG responded positively in their evaluation.

EFRAG is seeking comments on its assessments by 2 September 2013.

Click for:

EFRAG press release and draft Endorsement Advice (link to EFRAG website)