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Questions and Answers
What must an entity assess when applying paragraph 13 of IFRIC 23?
What must an entity assess when applying paragraph 13 of IFRIC 23?
- The internal policies of the organization.
- The relevance and effect of a change in facts. (correct)
- The financial impact on future periods.
- The historical financial statements.
Which event would most likely result in the reassessment of a judgment or estimate?
Which event would most likely result in the reassessment of a judgment or estimate?
- A change in the organization's management.
- An examination by a taxation authority. (correct)
- A new general accounting standard issued.
- A minor internal policy change.
When should an entity apply IAS 10 according to the provided guidance?
When should an entity apply IAS 10 according to the provided guidance?
- When new financial forecasts are created.
- To evaluate whether a change is an adjusting or non-adjusting event. (correct)
- When there is a change in the management structure.
- To determine the relevance of prior estimates.
Which situation may indicate a different tax treatment needs reassessment?
Which situation may indicate a different tax treatment needs reassessment?
What does an entity NOT need to consider under paragraph 13 of IFRIC 23?
What does an entity NOT need to consider under paragraph 13 of IFRIC 23?
Which of the following is not listed as a change in facts or circumstances that could trigger a reassessment?
Which of the following is not listed as a change in facts or circumstances that could trigger a reassessment?
What is the primary purpose of applying IAS 8 in this context?
What is the primary purpose of applying IAS 8 in this context?
Which of these actions by a taxation authority might require an entity to reassess its tax treatment?
Which of these actions by a taxation authority might require an entity to reassess its tax treatment?
What factor does NOT affect the reassessment of a judgment or estimate under IFRIC 23?
What factor does NOT affect the reassessment of a judgment or estimate under IFRIC 23?
What aspect of uncertain tax treatments does the Interpretation focus on regarding an entity's approach?
What aspect of uncertain tax treatments does the Interpretation focus on regarding an entity's approach?
How should an entity assess the examination of tax treatments by taxation authorities?
How should an entity assess the examination of tax treatments by taxation authorities?
What should an entity consider while determining if an uncertain tax treatment will be accepted by a taxation authority?
What should an entity consider while determining if an uncertain tax treatment will be accepted by a taxation authority?
In the context of uncertain tax treatments, what does 'tax bases' refer to?
In the context of uncertain tax treatments, what does 'tax bases' refer to?
When considering multiple uncertain tax treatments, how should an entity read references in the Interpretation?
When considering multiple uncertain tax treatments, how should an entity read references in the Interpretation?
What assumption must an entity make about taxation authorities in relation to their examinations?
What assumption must an entity make about taxation authorities in relation to their examinations?
Which of the following elements is NOT directly addressed in how entities determine taxable profit?
Which of the following elements is NOT directly addressed in how entities determine taxable profit?
Which factor should influence how an entity prepares its income tax filings?
Which factor should influence how an entity prepares its income tax filings?
What does the Interpretation suggest about changes in facts and circumstances related to tax treatments?
What does the Interpretation suggest about changes in facts and circumstances related to tax treatments?
What is the main purpose of IFRIC 23?
What is the main purpose of IFRIC 23?
According to IFRIC 23, what should an entity do regarding uncertain tax treatments?
According to IFRIC 23, what should an entity do regarding uncertain tax treatments?
What does IFRIC 23 require an entity to assess concerning taxation authorities?
What does IFRIC 23 require an entity to assess concerning taxation authorities?
What is one of the aspects entities must consider under IFRIC 23 when evaluating uncertain tax treatments?
What is one of the aspects entities must consider under IFRIC 23 when evaluating uncertain tax treatments?
What is included in the Appendices of IFRIC 23?
What is included in the Appendices of IFRIC 23?
Which of the following aspects is NOT addressed in the scope of IFRIC 23?
Which of the following aspects is NOT addressed in the scope of IFRIC 23?
What characterizes an uncertain tax treatment under IFRIC 23?
What characterizes an uncertain tax treatment under IFRIC 23?
What does the term 'tax treatments' refer to in IFRIC 23?
What does the term 'tax treatments' refer to in IFRIC 23?
Which entity is responsible for deciding the acceptability of tax treatments under tax law?
Which entity is responsible for deciding the acceptability of tax treatments under tax law?
When should an entity recognize and measure its current or deferred tax asset or liability according to IFRIC 23?
When should an entity recognize and measure its current or deferred tax asset or liability according to IFRIC 23?
How does IFRIC 23 relate to IAS 12?
How does IFRIC 23 relate to IAS 12?
What could affect an entity's accounting for tax assets or liabilities according to the content?
What could affect an entity's accounting for tax assets or liabilities according to the content?
Which of the following elements is NOT considered when measuring current or deferred tax assets or liabilities under IFRIC 23?
Which of the following elements is NOT considered when measuring current or deferred tax assets or liabilities under IFRIC 23?
If an entity decides not to submit an income tax filing, what does this represent?
If an entity decides not to submit an income tax filing, what does this represent?
What potential impact does uncertainty over tax treatments have on financial statements?
What potential impact does uncertainty over tax treatments have on financial statements?
If an entity concludes that it is probable the taxation authority will accept an uncertain tax treatment, what must the entity do next?
If an entity concludes that it is probable the taxation authority will accept an uncertain tax treatment, what must the entity do next?
What must an entity do if it concludes it is not probable that the taxation authority will accept an uncertain tax treatment?
What must an entity do if it concludes it is not probable that the taxation authority will accept an uncertain tax treatment?
When using the 'most likely amount' method, what type of outcomes is it best suited for?
When using the 'most likely amount' method, what type of outcomes is it best suited for?
Which method involves summing probability-weighted amounts in a range of possible outcomes?
Which method involves summing probability-weighted amounts in a range of possible outcomes?
What should an entity do if an uncertain tax treatment affects both current and deferred tax?
What should an entity do if an uncertain tax treatment affects both current and deferred tax?
When must an entity reassess a judgment or estimate according to the interpretation?
When must an entity reassess a judgment or estimate according to the interpretation?
If an entity has determined that an uncertain tax treatment is likely accepted, which of the following is NOT true?
If an entity has determined that an uncertain tax treatment is likely accepted, which of the following is NOT true?
What is the primary purpose of reflecting the effect of uncertainty in tax-related determinations?
What is the primary purpose of reflecting the effect of uncertainty in tax-related determinations?
Which scenario dictates the use of the expected value method for determining tax-related uncertainty?
Which scenario dictates the use of the expected value method for determining tax-related uncertainty?
What should an entity do if it identifies significant changes in facts and circumstances affecting its tax estimates?
What should an entity do if it identifies significant changes in facts and circumstances affecting its tax estimates?
Study Notes
IFRIC 23: Uncertainty Over Income Tax Treatments
- Clarifies IAS 12 application when uncertainty exists regarding income tax treatments.
- Addresses whether to consider uncertain tax treatments separately or together, based on which approach better predicts uncertainty resolution. Factors considered include income tax filing preparation and how the taxation authority is expected to conduct examinations.
- Assumes taxation authorities will examine amounts they have a right to and possess full knowledge of all related information.
- Determines taxable profit (loss), tax bases, unused tax losses, credits, and rates based on the probability of a taxation authority accepting the uncertain tax treatment.
- If acceptance is probable, uses the treatment in income tax filings.
- If acceptance isn't probable, reflects uncertainty using either the most likely amount or the expected value, depending on which better predicts uncertainty resolution. The most likely amount is suitable when outcomes are binary or concentrated; expected value when outcomes are diverse.
- Maintains consistency in judgements and estimates for both current and deferred tax if an uncertain tax treatment affects both.
- Requires reassessment of judgements and estimates based on changes in facts, circumstances, or new information. This reassessment follows IAS 8 treatment. IAS 10 applies to changes occurring after the reporting period.
- Appendix A gives guidance on changes in facts and circumstances, including examinations by tax authorities, changes in rules, and expiry of examination rights.
- Issued by the IASB in May 2017.
- References IAS 1, IAS 8, IAS 10, and IAS 12.
Key Definitions (IFRIC 23)
- Tax treatments: Methods used or planned for income tax filings.
- Taxation authority: Body deciding tax treatment acceptability (including courts).
- Uncertain tax treatment: Tax treatment with uncertain acceptance by the taxation authority. Examples include not filing or omitting income.
Applying IFRIC 23
- Considers whether each uncertain tax treatment should be assessed separately or in a group. The choice depends on which approach better predicts the outcome.
- If assessing multiple treatments together, references to "an uncertain tax treatment" apply to the group.
- If a tax authority's acceptance is probable, use its planned treatment in the income tax filings when determining tax amounts.
- If a tax authority's acceptance is improbable, reflect uncertainty using either the most likely amount or expected value method depending on the situation.
Appendix A: Application Guidance
- Highlights that assessments of changes in facts and circumstances should consider applicable tax laws. Effects may differ for tax treatments under different laws.
- States examples of changes in facts and circumstances that might lead to re-assessment:
- Tax authority actions (agreement/disagreement with used treatments, similar treatments used by other entities, settlement amounts).
- Changes in rules by taxation authorities.
- The expiry of a taxation authority’s right to examine a tax treatment.
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Description
This quiz explores IFRIC 23 and its implications on IAS 12 regarding uncertain income tax treatments. It covers how to assess tax positions based on probable acceptance from tax authorities and the evaluation methods to predict outcomes. Test your understanding of the correct application and the factors influencing tax treatment decisions.
