Ias 12 income taxes july 2014 recognition of current income tax on uncertain tax position the interpretations committee received a request to clarify the recognition of a tax asset in the situation in which tax laws require an entity to make an immediate payment when a tax examination results in an. Ias 12 measurement of income tax on uncertain tax positions. Illustration 7 types of disclosures required by ias 12 62. Sep 22, 2017 ifric 23 deals with uncertain tax positions. Some gaap differences are longstanding, but other nuances are emerging as the accounting issues around us tax reform are resolved. Check this box if the corporation was unable to obtain information from related parties sufficient to determine whether a tax position is a utp. Ias 12 measurement of income tax on uncertain tax positions date recorded. Essential asc 740 resources for businesses i taxops taxops. The project aims to resolve problems without changing the fundamental approach under ias 12, and without increasing differences with us gaap. Scope the issued guidance applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. Ias 12 contains no provision that allows or requires the offset of current tax and deferred tax. An uncertain tax treatment is any tax treatment applied by an entity.
Tax positions that meet a recognition criterion are then measured to determine an amount to recognize in the financial statements. Uncertain tax positions are now to be presented as part of the current or deferred tax balances, instead of as a separate provision. However, neither ias 12 nor ifric 23 contains guidance on the. As a result of these recent developments, it is likely that ias 12, in its current form other than uncertain tax positions, will apply on the transition to ifrs. For positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. When it is probable that the taxation authority will accept an uncertain tax treatment, paragraph 88 of ias 12 should be applied to determine the disclosure of a taxrelated contingency in june 2019, the committee discussed a submission about the presentation of liabilities or assets related to uncertain tax treatments. Ias 1 presentation of financial statements ias 1, in turn, speci. Ias 12 is applicable for annual reporting periods commencing on or after 1 january 1998. Relevant guidance asc 740 ias 12 and ifric 23 tax basis tax basis is a question of fact under the tax law. Staff paper march 2017 interpretations committee meeting. For investment funds, it will apply to capital gains realised and unrealised, interest income and dividend income. This ifrs standard mandates the allocation of taxes between periods as determined by the recognition of transactions in periods governed by the application of ifrs. Scope the issued guidance applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of.
The ifrs interpretations committee ifrs ic issued ifric 23, which clarifies how the recognition and measurement requirements of ias 12 income taxes, are applied where there is uncertainty over income tax treatments. Some of these differences may create practical issues for dual reporters. 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 background 1 ias 12 income taxes specifies requirements for current and deferred tax assets and liabilities. International accounting standards ias 12, income taxes.
However, ias 12 gives no further guidance on the treatment of uncertain tax positions. Ias 12 income taxesmeasurement of current income tax on uncertain tax position agenda paper 4 the interpretations committee received a request to clarify accounting for assets and liabilities arising from uncertain tax positions utps. A tax benefit can only be realized where there is a greater than 50 percent likelihood of the position being upheld. View b of the april 2012 meeting report indicates that uncertain tax positions do meet the scope exception of paragraphs 24 and 25 of ifrs 3.
Under this subtopic, a tax position is first evaluated for recognition based on its technical merits. Tax rates the enacted tax rates are used to calculate income tax amounts. Enacted or substantively enacted rates are used to calculate income tax amounts. The origin of the twostep recognition model and its application are discussed, including the recognition threshold, measurement criteria, and derecognition criteria, including accrual of interest and penalties on unrecognized amounts. Guide to international financial reporting standards in canada ias 12 income taxes irene wiecek, fcpa, fca. Ias 12 measurement of current tax assets and liabilities when a tax position is uncertain. Ifric 23 addresses the accounting for income taxes current and defe rred when tax treatments involve uncertainty that a ffects the application of. The nature of the event that could occur in the next 12 months that would cause the change 3. The differences in recognition for financial statements and for tax purposes are reconciled through deferred taxes. Ias 12 definitions 8 overview of key requirements 8 analysis of relevant issues 11 scope 11 current tax liabilities and current tax assets 14 recognition of current taxes 14 measurement of current taxes 14 recognition of deferred tax 16 carrying amount v. Tax provision work related to asc 740 fas 109 and fin 48, accounting for income taxes, requires businesses to analyze and disclose income tax positions and risks. Ias 12 accounting for uncertainties in income taxes.
Ias 12 does not include explicit guidance on the recognition and measurement of uncertain tax. Ifrs ic decision on presentation of uncertain tax liabilities or. Accounting for uncertainty in income taxes under ifrs and us gaap. Reporting uncertain tax positions on schedule utp tax positions to be reported. Sep 10, 2015 the view that uncertain tax positions are subject to the ias 12 recognition and measurement exception in ifrs 3. In january 2014, the ifrs ic considered a request for guidance on the recognition of a current tax asset in the sense of ias 12 when the tax position was uncertain. In some circumstances, however, the utp affects the tax base of an asset or liability, and is presented as a deferred tax asset or liability. Uncertain tax positions acquired in a business combination excerpt, ifrs discussion group report on meeting april 19, 2012.
Guide to international financial reporting standards in. If it is probable that the tax authorities will accept an uncertain tax treatment, then the tax amounts recorded in the financial statements are consistent with. Ias 11 had originally been issued by the iasc in october 1996. Recognition of current income tax on uncertain tax position. Ias 12s lack of guidance on uncertain tax positions has resulted in diversity in practice. Changes in tax status 52 uncertain tax positions 52 recognition and measurement 56. The definitions in ias 12 of current tax and deferred tax liabilities or assets.
Part i uncertain tax positions for the current tax year. Ias 12 income taxes includes requirements on recognition and measurement of tax assets and liabilities, but does not specify how to reflect. Sep 17, 2014 ias 12 measurement of income tax on uncertain tax positions date recorded. Aug 03, 2012 typically, a utp that affects current tax is presented as a current tax liability. In practice, this frequently results in the recognition principles in ias 37, provisions, contingent liabilities and contingent assets, being applied. Ifric 23 explains how to recognise and measure deferred and current income tax assets and liabilities if there is uncertainty over a tax treatment. Ifrs in focus iasb publishes a draft interpretation of ias 12 income. The ic was asked to clarify how uncertain tax positions should be presented. Ifric 23 uncertainty over income tax treatments efrag. The ifrs ic subsequently discussed the measurement of uncertain tax positions with reference to current income tax in accordance with ias 12 on several occasions and decided to publish guidance in the form of a draft interpretation. The schedule utp as originally proposed by the irs would have required a corporation to disclose the maximum tax adjustment for each tax position listed except for transfer pricing and other valuation positions. Applicable tax rate for the measurement of deferred tax relating to an investment in an associate ias 12 jul 2014 recognition of current income tax on uncertain tax positions ias 12.
The amendment is part of a narrow scope project that the iasb. Uncertain tax positions a twostep process is applied. Does an entity consider uncertain tax treatments separately. Presentation of liabilities or assets related to uncertain tax. The ifrs ic had clarified previously that ias 12, not ias 37. Recovery of underlying assets amendm ents to ias 12. That measurement incorporates information about potential settlements with taxing authorities. Income taxes resulted from the efforts and ideas of various rsm us llp. The wording in paragraph in9 of ifrs 3 implies that all. Some entities apply the requirements in ias 12 to interest and penalties.
Q7 uncertain tax positions ias 12 is silent on how to account for uncertainty over whether the tax authority will accept the amounts reported to it. Ifric 23 uncertainty over income tax treatments interpretation zu. Measurement of current income tax on uncertain tax position link to the iasbs website which provided background information on uncertainties and proposed two alternatives for the measurement of uncertain. Enter, in part iii, a description for each uncertain tax position utp. The exposure draft proposes that current and deferred tax assets and liabilities should be measured at the probability. Ias 12, not ias 37 provisions, contingent liabilities and contingent assets, applies to accounting for uncertain income tax treatments. Iasb issues ifric 23 uncertainty over income tax treatments 1 issues a question has arisen in practice as to how uncertainty about the acceptability by a tax authority of a particular tax treatment used by an entity in its income tax filings uncertain tax treatment should be reflected in the financial statements. For canadian entities that will adopt ifrs in 2011, applying current ias 12 at the date of transition and. Ias 12 does not include explicit guidance on the recognition and measurement of uncertain tax positions. In such a circumstance, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in ias 12 based on taxable profit tax loss, tax bases, unused tax losses, unused tax credits and tax. It discussed the issue in january, may and july 2014 and noted that one of the. A rate is considered substantively enacted when only perfunctory actions are required for a measure to become law. That said, uncertain tax positions are more likely to arise for an investment fund in the context of capital gains tax rather than withholding taxes which are. See instructions for how to complete columns a through g.
We recommend directors engage with their nexia tax advisor and our financial reporting advisory specialists to discuss the extent and current treatment of uncertain tax positions and how interpretation 23 may affect your financial report. Iasb issues ifric 23 uncertainty over income tax treatments. The board has not undertaken any specific implementation support activities relating to this standard. Proponents of this view say the amounts paid or payable for interest and penalties are closely related to the amounts paid or payable for income taxes and, therefore, entities should apply the requirements in ias 12 to interest and penalties. When the committee rejects an issue, it publishes an agenda decision explaining. Ifrs newsletter conversion deferred tax guide ias 12 december. The interpretations committee understood that the reference to ias 37 in paragraph 88 of ias 12 in respect of taxrelated contingent liabilities and contingent assets may have been understood by some to mean that ias 37 applied to the recognition of such items. For canadian entities that will adopt ifrs in 2011, applying current. The interpretation does not apply to taxes or levies outside the scope of ias 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. Schedule utp uncertain tax position statement form 1120. In this module, our study of income taxes continues with a discussion about uncertain tax positions. It is not clear if some taxes are income taxes for fin 48 purposes, such as the new texas margin tax or various local gross receiptsbased taxes.
When uncertainty was high, uncertain tax positions should be measured at expected value, otherwise other estimates could be applied. The ifrs interpretations committee observed diversity in practice regarding the recognition and measurement of current tax, deferred tax liabilities and deferred tax assets as defined by paragraph 5 of ias 12 income taxes, when there are uncertainties in the amount of income tax payable recoverable. The dp discusses the alternative approaches to the measurement of uncertain tax positions, including the weighted average approach and the most likely approach. A similar question could arise regarding uncertain tax assets. Taxes accounting for uncertainties in an income tax liability or asset set out in the. Objective ias 12 prescribes the accounting treatment for income taxes being the accounting for the current and future tax consequences of. Ifric 23 addresses the accounting for income taxes current and defe rred when tax treatments involve uncertainty that a ffects the application of ias 12 income taxes. Ifrs newsletter conversion deferred tax guide ias 12. The ifrs interpretations committee has previously considered a number of relevant issues that have been submitted by stakeholders. When it is probable that the taxation authority will accept an uncertain tax treatment, paragraph 88 of ias 12 should be applied to determine the disclosure of a tax related contingency in june 2019, the committee discussed a submission about the presentation of liabilities or assets related to uncertain tax treatments. The liability for uncertain income tax positions that syngenta expects will be resolved in 2019 is approximately 9 percent of total recognized current income. Ias 12 accounting for uncertainties in income taxes ias plus.
On 20 december 2010 the iasb issued the 2010 amendment to ias 12 deferred tax. The interpretations committee received a request to clarify the. The interpretations committee noted that paragraph 12 of ias 12 income taxes provides guidance on recognition in such a situation, but observed diversity in practice for various issues on the recognition and. Uncertain tax positions should be measured at either expected value, most likely estimate or morelikelythannot estimate. The committee discussed how current tax assets and liabilities should be measured when tax positions are uncertain and the priciples of a corresponding draft. Releases of uncertain tax liabilities during 2018 and 2017 related to changes in tax legislation, closure of previously open tax computations through expiry and settlement of tax audits. Ifric ifric 23 uncertainty over income tax treatments interpretation zu ias 12. Under ias 12, tax assets and liabilities should be measured at the amount expected to be paid. Presentation of liabilities or assets related to uncertain.
Should an entity provide for all uncertain tax treatments. Users also want to understand an entitys uncertain tax position. These standards affect all ccorporations required to produce generally accepted accounting principles gaap financial statements. The introduction interpretation 23 is likely to impact the recognition of income tax balances of some entities. Ias 12 income taxesmeasurement of current income tax on uncertain tax position agenda papers 3 and 3a the interpretations committee received a request to clarify the recognition of a tax asset in the situation in which tax laws require an entity to make an immediate payment when a tax examination results in an. The committee discussed the accounting for liabilities arising from uncertain tax positions. Decisions taken by an entity in measuring its income tax assets and liabilities for financial statement purposes when the tax law is unclear are generally referred to as uncertain income tax positions. An uncertain tax treatment is an income tax treatment in applying ias 12 for which there is uncertainty over whether the relevant tax authority will accept the tax treatment under tax law. The us tax reform has brought into sharp focus the differences between ifrs ias 12 and us gaap asc 740 in accounting for income taxes. Neither ias 12 income taxes nor ifric 23 uncertainty over income tax treatments. The tax is due in accordance with the law, and that tax should be recognised in full in the financial statements. The interpretations committee noted that paragraph 12 of ias 12 income taxes provides guidance on recognition in such a situation, but observed diversity in practice for various issues on the recognition and measurement of a tax liability or asset in circumstances in which there is uncertainty in the application of the tax law.
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