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Income Taxes: Short-term Convergence

Date recorded:

The Board discussed aspects of the income taxes project related to uncertain tax positions and special deductions.

The staff recommended that any uncertainty over filed tax positions be regarded as giving rise to a stand-ready liability to pay additional tax.

The Board agreed with this recommendation. It was viewed as consistent with the principle in IAS 37 that the uncertainty surrounding the potential for the tax authorities to reject the filing of an aggressive tax return should be regarded as a stand-ready obligation. However, the measurement of that liability would be based on expected value in accordance with IAS 12 methodology that does not require risk adjustment. In terms of IAS 12, measurement will be determined by tax rates that are substantively enacted at the balance sheet date. The Board noted that it has not yet discussed the effect of possible deductions (for instance, small company deductions) in as far as they affect deferred taxation.

The Board agreed with the staff's proposals to retain the disclosures over uncertainties surrounding the tax balances proposed in the amendments to IAS 37.

The Board also agreed that IAS 12 should be amended to adopt the SFAS 109 impairment approach to the recognition of deferred tax assets.

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