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IFRIC 23 Uncertainty over Income Tax Treatments

IFRIC 23 clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty over income tax treatments.

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Summary

IFRIC 23 applies where there is uncertainty over the acceptable income tax treatment of an item, for example, whether an item of income is taxable or not. The Interpretation requires that:

  1. An entity determines whether to consider each uncertain income tax treatment separately or together with other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty.
  2. An entity assumes that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations.
  3. If an entity concludes that the tax authority will accept an uncertain tax treatment, it will determine taxable profits, tax bases, tax losses, tax credits and tax rates consistently with that treatment.
  4. If an entity concludes that the tax authority will probably not accept an uncertain tax treatment, it should reflect the effect of uncertainty when determining taxable profits, tax bases, tax losses, tax credits and tax rates consistently with that treatment. The effect of uncertainty may be reflected based on the most likely amount or expected values.
  5. Consistent judgements and estimates must be made for both current and deferred tax.
  6. A judgement or estimate should be reassessed if the facts or circumstances on which it was based change.

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