IAS 37 — Payments relating to taxes other than income tax

Date recorded:

IAS 37 Provisions, Contingent Liabilities and Contingent Assets - Payments relating to taxes other than income tax (Agenda Paper 2)


In March the Committee discussed a request from the European Securities Market Authority (ESMA) to interpret IAS 37 in relation to payments relating to uncertain tax treatments that are outside the scope of IAS 12 Income Taxes (i.e. the payments are for taxes other than income tax). It relates to when an entity makes a voluntarily payment equal to the disputed amount to the tax authority in order to avoid possible penalties or interest.

The Committee agreed with the staff analysis that the payment made by the entity meets the definition of an asset. On making the payment, the entity has the right to receive future economic benefits either in a form of cash or by using the payment to settle the tax liability. The payment is not a contingent asset as defined by IAS 37 because it is an asset, and not a possible asset, of the entity.

The staff brought this back to consider whether the analysis should assess the nature of the transaction against the new definition of an asset in the revised Conceptual Framework or the definition of an asset in the IFRS Standards. The definitions are not aligned, and this is the first time such a situation has arisen.

The staff concluded that they should use the Conceptual Framework definition. The definition in IFRS is in IAS 38 Intangible Assets. They assert that the balances they are assessing are not intangible assets and therefore that Standard does not deal with “similar” matters. On this basis the definitions and guidance in IAS 38 are only relevant to intangible assets.

The staff recommended that the Committee not to add this matter to its agenda and that the Committee should publish a tentative agenda decision to that effect.


Before opening the discussion, the Chair suggested that instead of issuing a tentative agenda decision as a result of the discussion in this session, the conclusions of the Committee should be circled back to the Board. She reminded the Committee that this is the first time the revised Conceptual Framework is used by the Board or the Committee and it would be prudent to get the Board’s views on whether the definitions in the Conceptual Framework function as intended.

The Committee agreed with the staff analysis and the conclusion that the new definition of an asset in the 2018 Conceptual Framework does not change the Committee’s previous conclusion on the issue. The Committee observed that there is no specific Standard that applies to the fact pattern. Hence, preparers are required to apply the hierarchy in IAS 8 and thus refer to the definitions in the Conceptual Framework. However, many of the Committee members suggested to clarify in the tentative agenda decision that preparers should only look to the Conceptual Framework to determine whether an asset exists or not. The tentative agenda decision should remain silent on whether this asset is recognised and how the asset is measured, although one Committee member warned that this might increase diversity in practice. It was suggested that preparers look to similar IFRS Standards to determine an appropriate accounting policy for the recognition and measurement of this asset.

One Committee member asked whether the tentative agenda decision should also consider the existence of a liability in the fact pattern. However, this was not supported by a majority in the Committee as this aspect is not within the scope of the question submitted.

One Committee member suggested to only consider the existing Conceptual Framework in the tentative agenda decision, but this was also not supported by a majority of the Committee. Opponents of this view said that referring to the revised Conceptual Framework would make the agenda decision ‘future proof’.

The Chair summarised the points that would be taken to the Board. After the Board discussion, the issue will be reverted back to the Committee. No decisions were made.

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