IAS 12 — Classification of tonnage taxes

Date recorded:

The IFRIC debated a submission that asked for clarification whether tonnage taxes could be seen as income taxes. This is important for the income statement as income taxes are presented separately from other expenses. If tonnage tax was not an income tax it would form part of cost of sales if the income statement was classified by function.

Some IFRIC members were confused what was meant by a tonnage tax and whether it was based on capacity or actual goods transported. Additionally, some wondered whether this tax was in lieu of income taxes or in addition. Many saw tonnage taxes as a kind of income tax. Others noted that the definition of income taxes in IAS 12 requires taxes payable to be based on a net income figure – which was not the case under fact pattern of the submission.

After some debate it was decided not to add the item to the agenda, make clear what was meant by tonnage tax in the submission, that it did not represent an income tax, but to note that preparers were free to add subtotals to separate this tax from other operating expenses.

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