PwC Comments on Tentative agenda decision: IAS 12 Income taxes - Corporate wrapper

PwC Global Network of Firms does not support the tentative agenda decision as drafted. The Firm supports the Committee's conclusion that this item should not be taken onto the agenda because it raises fundamental questions about the principles in IAS 12 that should be addressed by the IASB.

Comment letter

Mr Michael Stewart
Director of Implementation Activities
International Accounting Standards Board
30 Cannon Street
London
EC4M 6XH

17 October 2011

Dear Mr Stewart

Tentative agenda decision: IAS 12 Income taxes – Corporate wrapper

We are responding to your invitation to comment on the above tentative agenda decision, published in the September 2011 edition of IFRIC Update, on behalf of PricewaterhouseCoopers.

Following consultation with members of the PricewaterhouseCoopers network of firms, this response summarises the views of member firms who commented on the tentative agenda decision. ‘PricewaterhouseCoopers’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

We do not support the tentative agenda decision as drafted. We support the Committee's conclusion that this item should not be taken onto the agenda because it raises fundamental questions about the principles in IAS 12 that should be addressed by the IASB. The board should address these issues as soon as possible. However, we note that the Committee has stated clearly in the penultimate sentence of the second paragraph of the tentative agenda decision that entities are not able to avoid recognising deferred taxes relating to the underlying assets even if the entity does not expect to dispose of the asset separately. We are aware that there is currently significant diversity in practice on this issue and that the tentative agenda decision might be interpreted as requiring some entities to alter their accounting policies. We suggest that the Committee reconsider this aspect of the tentative agenda decision taking into account the existing diversity in practice.

The second and third paragraphs of the tentative agenda decision appear to be inconsistent. The second paragraph suggests that the existing guidance is clear. The third paragraph acknowledges that there are other broader concerns relating to this issue and that these concerns should be resolved by the board through a broader reconsideration of the principles of IAS 12. We suggest that the Committee clarifies and reconsiders the wording of the tentative agenda decision in this respect. We encourage the Committee to recommend to the IASB that this issue is taken onto the agenda at an appropriate time.

If you have any questions in relation to this letter please do not hesitate to contact John Hitchins, PwC Global Chief Accountant (020 7804 2497) or Tony de Bell (020 7213 5336).

Yours faithfully

PricewaterhouseCoopers