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Questions and Answers
An entity must reassess its judgments and estimates only if facts and circumstances improve.
False
IFRIC 23 was effective beginning on 1 January 2019, and earlier application is not allowed.
False
Full retrospective application of the requirements is only allowed when an entity uses hindsight.
False
The cumulative effect of initially applying the requirements should be recognized in retained earnings or other appropriate components of equity.
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ESMA announced enforcement priorities for 2019 financial statements after the adoption of IFRIC 23.
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IFRIC 23 was issued on 7 June 2017 and became effective for annual periods beginning on or after 1 January 2020.
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Under IFRIC 23, entities must always consider each tax treatment independently without the option to group them.
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According to IFRIC 23, an entity assumes that a tax authority will examine reported amounts with full knowledge of all relevant information.
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An entity must always use the expected value when determining taxable profit if a particular tax treatment is probable to be accepted.
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The consensus in IFRIC 23 states that tax treatments cannot be considered collectively under any circumstances.
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IFRIC 23 applies to the determination of tax bases only, and not to unused tax credits or tax losses.
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IFRIC 23 clarifies the accounting for uncertainties in income taxes as per IAS 12.
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IFRIC 23 was added to the Interpretations Committee's agenda in January 2016.
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Study Notes
IFRIC 23: Uncertainty over Income Tax Treatments
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Clarifies accounting for uncertainties in income taxes, applying to determining taxable profit (or loss), tax bases, unused tax losses/credits, and tax rates under IAS 12.
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Issued June 7, 2017, effective for annual periods beginning on or after January 1, 2019; earlier application permitted.
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Addresses whether tax treatments should be considered collectively or independently. Judgment is required; the approach providing better predictions of uncertainty resolution should be used.
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Assumes taxation authorities will examine reported amounts, possessing full knowledge of relevant information.
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Requires assessment of the probability of a tax authority accepting each tax treatment (or group).
- If probable: Taxable profit, etc., determined consistently with the tax treatment in income tax filings.
- If not probable: Most likely amount or expected value used for determination. Again, the method providing better prediction of uncertainty resolution is preferred.
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Mandates reassessment of judgments and estimates if facts and circumstances change.
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Transition: Cumulative effect of initial application recognized in retained earnings (or other appropriate equity components) at the start of the reporting period of first application, without adjusting comparative information. Full retrospective application is allowed if feasible without hindsight.
Timeline
- Added to the Interpretations Committee's agenda in January 2014.
- Discussion paper (DI/2015/1) published October 21, 2015.
- The EU formally adopted IFRIC 23 on October 24, 2018.
Related Standards
- 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
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Description
This quiz covers IFRIC 23, which clarifies accounting for uncertainties in income tax treatments. It explores critical aspects such as the assessment of taxable profit, judgment in tax treatment acceptance, and the method of determining amounts based on probability. Suitable for understanding tax accounting principles under IAS 12.
