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.

IFRS Interpretations Committee publishes draft interpretation on accounting for uncertainties in income taxes

  • IFRS IC document (blue) Image

21 Oct 2015

The IASB’s IFRS Interpretations Committee has published a draft interpretation 'Uncertainty over Income Tax Treatments'. Comments are requested by 19 January 2016.

 

Background

The IFRS Interpretations Committee observed diversity in practice regarding the recognition and measurement of current tax, deferred tax liabilities and deferred tax assets as defined by paragraph 5 of IAS 12 Income Taxes, when there are uncertainties in the amount of income tax payable (recoverable). As a consequence, the Interpretations Committee decided to develop an interpretation.

 

Proposed guidance

Scope

The draft proposes that the interpretation be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

Issues

Whether tax treatments should be considered collectively

An entity is required to use judgement to determine whether each tax treatment should be considered independently or whether some tax treatments should be considered together. The decision should be based on which approach provides better predictions of the resolution of the uncertainty.

Assumptions for taxation authorities' examinations

An entity is to assume that a taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when doing so.

Determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing.

  • If the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.
  • If the entity concludes that it is not probable that a particular tax treatment is accepted, the entity has to use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The decision should be based on which method provides better predictions of the resolution of the uncertainty.

Effect of changes in facts and circumstances

An entity has to reassess its judgements and estimates if facts and circumstances change.

Disclosures

The draft interpretation does not contain any new disclosure requirements. Instead it highlights existing disclosure requirements in IAS 1, IAS 12 and IAS 37.

Transition

An entity has to apply the requirements by recognising the cumulative effect of initially applying them in retained earnings, or in other appropriate components of equity, at the start of the reporting period in which an entity first applies them, without adjusting comparative information. Full retrospective application is permitted, if an entity can do so without using hindsight.

 

Comment deadline and additional information

Comments on DI/2015/1 Uncertainty over Income Tax Treatments are requested by 19 January 2016. Please click for:

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.