IFRIC 23 — Uncertainty over Income Tax Treatments
References
- IAS 1 Presentation of Financial Statements
- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
- IAS 10 Events after the Reporting Period
- IAS 12 Income Taxes
History of IFRIC 23
Date | Development | Comments |
---|---|---|
January 2014 | Added to the Interpretations Committee's agenda | |
21 October 2015 | DI/2015/1 Uncertainty over Income Tax Treatments published | Comment deadline 19 January 2016 |
7 June 2017 | IFRIC 23 Uncertainty over Income Tax Treatments issued | Effective for annual periods beginning on or after 1 January 2019 |
Summary of IFRIC 23
Issue
IFRIC 23 clarifies the accounting for uncertainties in income taxes.
Scope
The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.
Consensus
Whether tax treatments should be considered collectively
An entity is required to use judgement to determine whether each tax treatment should be considered independently or whether some tax treatments should be considered together. The decision should be based on which approach provides better predictions of the resolution of the uncertainty.
Assumptions for taxation authorities' examinations
An entity is to assume that a taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when doing so.
Determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing.
- If the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.
- If the entity concludes that it is not probable that a particular tax treatment is accepted, the entity has to use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The decision should be based on which method provides better predictions of the resolution of the uncertainty.
Effect of changes in facts and circumstances
An entity has to reassess its judgements and estimates if facts and circumstances change.
Effective date
IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.
Transition
The requirements are applied by recognising the cumulative effect of initially applying them in retained earnings, or in other appropriate components of equity, at the start of the reporting period in which an entity first applies them, without adjusting comparative information. Full retrospective application is permitted, if an entity can do so without using hindsight.