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IFRS implementation issues

Date recorded:


The IFRS Interpretations Committee received a request to clarify an issue relating to the application of the requirements in IAS 12 Income Taxes. The issue relates to where to present any income tax consequences of payments on, and issuing costs of, financial instruments classified as equity.

The Interpretations Committee discussed the issue in November 2015 and March 2016 and recommended that the Board address the issue by proposing an amendment to IAS 12.

The purpose of this session is to discuss the staff analysis and recommendations.

Staff analysis

When the Interpretations Committee discussed the issue in November 2015 (agenda paper 8) the outreach indicated that the issue is common and that the predominant accounting was to present the income tax consequences described in the submission in equity.

But about one-third of the respondents said that there is at least some diversity in practice. Some of those respondents thought that some form of clarification would be helpful because the requirements in IAS 12 are unclear with respect to this issue.

The Interpretations Committee reached general agreement that an entity presents directly in equity income tax arising from the costs of issuing financial instruments classified as equity and that the IASB should amend IAS 12 to clarify that the presentation requirements in paragraph 52B apply beyond the circumstances described in paragraph 52A of IAS 12.

The Interpretations Committee also discussed the distinction between what is, and is not, a distribution of profits.  They agreed that this was the key question in applying the proposed amendment and one that would often require judgement. If the payments are distributions of profits, then paragraph 52B of IAS 12 applies to any income tax consequences of such payments whereas if they are not then any income tax consequences are presented directly in equity, applying paragraphs 57 and 61A of IAS 12. However, the committee concluded that amending IAS 12 to define or describe a distribution of profits would be too broad and have implications beyond IAS 12.

The staff analysis supports the recommendations of the interpretations committee, and accordingly, the staff recommends:

  • Amend IAS 12 to clarify that the presentation requirements in paragraph 52B of IAS 12 apply beyond the circumstances described in paragraph 52A of IAS 12, i.e. an entity would apply the presentation requirements in paragraph 52B to any income tax consequences of dividends;
  • The amendments should be made as an annual improvement;
  • The proposed amendment does not address the distinction between what is, and is not, a distribution of profits; and
  • The proposed amendment should be applied retrospectively and earlier application should be permitted.


No comment were raised by any Board members. The Board approved the staff recommendations.

IFRIC Update


The purpose of this session was for the staff to present the IFRIC update for the meeting that took place in May 2016. The Board was not asked to make technical decisions.


The staff highlighted that the Interpretations Committee finalised three agenda decisions, and published for comment three tentative agenda decisions. The Interpretations Committee also considered the comment letters received on the proposed Interpretation of IAS 21 and the proposed narrow scope amendment of IAS 40. The staff indicated that respondents were generally supportive of the proposals.

The staff also mentioned the discussion of the measurement of long term interests in an associate or joint venture and the interactions between IAS 28 and IFRS 9, noting that the Interpretations Committee planned to develop an Interpretation to clarify the issue. This drew some debate from the Board. Some Board members questioned whether an interpretation was preferable to a narrow scope amendment, noting that the issue only related to the existing scope exclusions in IFRS 9. The staff explained that the Interpretations Committee had held long discussions on this topic and even though the original question was related to the scope, the discussions highlighted that it was necessary to discuss how the accounting works. Some Board members said that it was difficult at this point to give an indication as to which path would be more reasonable (i.e. narrow scope amendment vs interpretation), because the Board had not had discussions as extensive as those held by the Interpretations Committee. The staff emphasised that even though the Interpretations Committee would develop the Interpretation, the Board will ultimately have to discuss and vote on whether to issue it.

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