IFRS IC decision on presentation of uncertain tax liabilities

At a glance

The IFRS Interpretations Committee (IC) concluded that an entity is required to present uncertain tax balances as current or deferred tax assets or liabilities. Such balances are not presented as provisions. Entities that present uncertain tax liabilities (or assets) classified on lines other than current or deferred tax assets or liabilities should consider the impact of the agenda decision on this presentation.

What is the issue?

IFRIC 23 clarifies how the recognition and measurement requirements of IAS/PAS 12, ‘Income taxes’, are applied when there is uncertainty over income tax treatments. The Interpretation is effective for annual periods beginning on or after January 1, 2019. However, neither IAS/PAS 12 nor IFRIC 23 contains guidance on the presentation of uncertain tax liabilities or assets.

The IC was asked to clarify how uncertain tax positions should be presented on the balance sheet. It observed that IAS/PAS 1 requires disclosure of liabilities and assets for current tax and for deferred tax liabilities and assets, both as defined in IAS/PAS 12. The same standard also requires that dissimilar items should not be aggregated. The IC also observed that IFRIC 23 requires that current and deferred tax assets and liabilities should be recognised and measured, including the impact of tax uncertainties.

The IC therefore concluded that an entity is required to present liabilities for uncertain tax treatments as current tax liabilities or deferred tax liabilities; and assets for uncertain tax treatments should be presented as current tax assets or deferred tax assets. Tax uncertainties are not presented on other lines (for example, provisions or other liabilities).

What is the impact and for whom?

Entities that present uncertain tax liabilities (or assets) classified on lines other than current or deferred tax assets or liabilities should consider the impact of the agenda decision on this presentation. The impact on presentation could be material in some cases.

When does it apply?

The agenda decision has no formal effective date. The IC has noted that agenda decisions might often result in explanatory material that was not previously available, which might cause an entity to change an accounting policy. The IASB expects that an entity would be entitled to sufficient time to determine and implement any change. In this case, entities should consider carefully the presentation of tax uncertainties in financial statements for periods ended on December 31, 2019. Any change in policy should be applied retrospectively, and comparative amounts should be restated.