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IFRIC 21 — Levies

References

  • IAS 1 Presentation of Financial Statements
  • IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
  • IAS 12 Income Taxes
  • IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
  • IAS 24 Related Party Disclosures
  • IAS 34 Interim Financial Reporting
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets
  • IFRIC 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment

History of IFRIC 21

Date Development Comments
31 May 2012 Draft Interpretation DI/2012/1 Levies Charged by Public Authorities on Entities that Operate in a Specific Market published Comment deadline 5 September 2012
20 May 2013 IFRIC 21 Levies issued Effective for annual periods beginning on or after 1 January 2014

 

Summary of IFRIC 21

Background

IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.

The Interpretation covers the accounting for outflows imposed on entities by governments (including government agencies and similar bodies) in accordance with laws and/or regulations.  However, it does not include income taxes (see IAS 12 Income Taxes), fines and other penalties, liabilities arising from emissions trading schemes and outflows within the scope of other Standards.

The Interpretation does not supersede IFRIC 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment, which remains in force and is consistent with IFRIC 21.

Obligating event

IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. The Interpretation clarifies that 'economic compulsion' and the going concern principle do not create or imply that an obligating event has occurred.

Recognition

IFRIC 21 provides the following guidance on recognition of a liability to pay levies:

  • The liability is recognised progressively if the obligating event occurs over a period of time
  • If an obligation is triggered on reaching a minimum threshold, the liability is recognised when that minimum threshold is reached.

The same recognition principles are applied in interim financial reports.

IFRIC 21 does not deal with how to account with costs arising from the recognition of a liability to pay a levy, and instead other standards are applied in determining whether the recognition of a liability gives rise to an asset or expense.

The Illustrative Examples accompanying IFRIC 21 provide the following examples of how to account for various types of levies. These are briefly summarised below:

 

Type Obligating event Interim reports
Levy triggered progressively as revenue is generated in current period Generation of revenue (recognise progressively) Recognise progressively based on revenue generated
Levy triggered in full as soon as revenue is generated in one period, based on revenues from a previous period Generation of revenue in the subsequent period (full recognition at that time) Recognise if revenue generated in interim period
Levy triggered in full if entity operates as a bank at the end of the reporting period Operating as a bank at the end of the reporting period (full recognition at that time) Only recognise in an interim period that includes the last day of the annual reporting period
Levy triggered if revenues are above a minimum threshold Reaching the minimum threshold (recognise an amount consistent with the obligation at that time) Only recognise in an interim period where the minimum threshold has been met or exceeded

IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. Initial application is in accordance with the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, i.e. the requirements are applied on a retrospective basis.

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