IFRIC 23: Uncertainty in Income Taxes

IFRIC 23: Uncertainty over Income Tax Treatments

• Clarifies accounting for uncertainties in income taxes under IAS 12. Applies to determining taxable profit/loss, tax bases, unused tax losses/credits, and tax rates.

• Issued June 7, 2017, effective for annual periods beginning on or after January 1, 2019; earlier application permitted.

• Addresses whether tax treatments should be considered collectively or individually. Entities must use judgment; the approach chosen should provide better predictions of uncertainty resolution.

• Assumes tax authorities will examine reported amounts, possessing full knowledge of relevant information.

• Requires assessment of the probability of tax authorities accepting each tax treatment (or group of treatments).

  • If probable: Use the treatment in income tax filings.
  • If not probable: Use the most likely amount or expected value. The chosen method should again best predict uncertainty resolution.

• Mandates reassessment of judgments and estimates if facts and circumstances change.

• Transition: Cumulative effect of initial application should be recognized in retained earnings (or appropriate equity components) at the start of the first reporting period of application. Comparative information is not adjusted. Full retrospective application is allowed if feasible without hindsight.