Draft IFRIC IAS 12 — Uncertainty over income tax treatments

Date recorded:

IAS 12 — Uncertainty over income tax treatments — Comment letter summary — Agenda paper 7


The Interpretations Committee published a Draft Interpretation Uncertainty over Income Tax Treatments in October 2015. The purpose of this session was for the staff to provide an overview of the feedback received. The Interpretations Committee was not asked to make technical decisions. The staff would present at a future meeting more detailed analysis and their recommendation.

Overview of the draft interpretation

The draft interpretation would apply to the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments that affect the application of IAS 12. The draft interpretation proposed: (i) guidance on determining the unit of account, (ii) a presumption that a tax authority has full knowledge and will analyse the entity’s tax returns; (iii) measuring the uncertainty using the most likely amount approach or the expected value approach (iv) a requirement to reassess the estimates when facts and circumstances change; but (v) does not propose additional disclosure requirements. 

Comment letters received

The staff indicated that there was overall support for the interpretation. The following specific concerns were noted by respondents:

  1. A few respondents disagreed with excluding interest and penalties from the scope, noting the diversity in practice and evidenced by most major accounting networks allowing an accounting policy choice between IAS 12 and IAS 37.
  2. Some respondents would prefer the interpretation to cover uncertain tax treatments beyond those related to income tax.
  3. A few respondents stated that the unit of account should allow entity specific factors.
  4. Some respondents want additional clarification about the appropriate assumption when a taxation authority’s right to examine has no time limit. 
  5. Approach to reflect uncertainty: Some respondents suggest that an entity should consider the probability of different scenarios in measurement, other respondents suggested that an entity should be allowed to use alternative methods to reflect the effect of uncertainty
  6. Consideration of changes in facts and circumstances: Some respondents asked for clarifications, others asked about the interaction with IAS 10 and the meaning of period of change.
  7. Applicability to business combinations: A few respondents asked for clarity in this respect.

The staff also indicated that respondents also suggested a number of editorial improvements.


There were no comments or questions raised by the Interpretation Committee members.

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