In July 2014, the IFRS Interpretations Committee (the IFRS IC) issued an agenda decision in response to a submission related to a particular situation in which an entity was required to make a payment to a taxation authority in respect of a disputed income tax treatment that had not yet been resolved. The IFRS IC noted that IAS 12 Income Taxes, and not IAS 37 Provisions, Contingent Liabilities and Contingent Assets, provides relevant guidance on the recognition of a current tax asset in such a situation and that paragraph 12 of IAS 12 states that if the amount already paid exceeds the amount of tax due for current and prior periods, the excess shall be recognised as an asset. The IFRS IC concluded that IAS 37 and, in particular, the requirement to recognise such an asset only when it is virtually certain that the entity would receive a refund from the taxation authorities, does not apply to the recognition and measurement of income taxes in the scope of IAS 12.
Nevertheless, the IFRS IC observed that IAS 12 does not specify how uncertainty in tax treatments is reflected in the measurement of current and deferred tax assets and liabilities. As a result, this has led to diversity in practice. Accordingly, the IFRS IC developed IFRIC 23 Uncertainty over Income Tax Treatments (IFRIC 23 or the Interpretation) to address how to reflect uncertainty in the recognition and measurement of income taxes.
Our publication below sets out our views on the requirements in the Interpretation and explains certain concepts that might be helpful to entities when they first apply IFRIC 23.
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