AASB 23 Interpretation – Uncertainty over Income Tax Treatment
Which entities are likely to be most impacted by IFRIC 23?
In response to this widespread diversity in practice for the recognition and measurement of uncertain tax positions, IFRIC 23 Uncertainty over Income Tax Treatments (implemented in Australia as AASB Interpretation 23 or ‘the Interpretation’) was issued in July 2017, and applies to annual reporting periods beginning on or after 1 January 2019.
The Interpretation brings new obligations with respect to the consideration of uncertain tax positions during financial statement audits. US companies have been subject to similar rules for a number of years by having to apply FIN 48.
By its very nature, income tax law is subject to a range of varied interpretations. As a result, reporting entities and their auditors may, in certain cases, be uncertain about whether a position adopted in the entity’s tax return would ultimately be sustained. Further, given the diverse risk profiles of companies, and in the absence of specific guidance on how to account for uncertain tax positions, significant disparity in how companies recognise and measure tax benefits recorded in their financial statements has arisen over a period of time.
The Interpretation is likely to have a significant impact on the quantum of income tax liabilities subject to judgemental areas, particularly in respect of any technical area where a position has been taken and the ATO has issued a Tax Alert or Practical Compliance Guideline that would characterise the position as high risk.
Webinar Learning Outcomes:
- Are uncertain tax treatments considered separately?
- Assume a tax audit will be conducted
- When is the effect of the uncertain tax position NOT reflected in tax calculations?
- When is the effect of the uncertain tax position reflected in tax calculations?
- Changes in facts and circumstances
- Effective date and transition
Preparers and auditors of financial reports, Tax accountants/Managers, Statutory Accountants/Managers, Technical Accountants, Corporate Reporting, Accountants/Managers, CFOs/ Controllers and Auditors.
Aletta Boshoff is a Partner and National Leader in IFRS Advisory at BDO Australia. Aletta has over 25 years’ experience in financial reporting and accounting, including IFRS. Aletta prides herself on her technical excellence, approachability, and the ability to solve problems practically. Aletta loves accounting and accounting standards, but she is also of the view that it’s only when you try and apply that knowledge that you are really challenged and that it is only then that you fully appreciate the nuances of IFRS.
Jason de Boer is a Tax Partner with BDO in Melbourne. He shares his technical expertise, with clients and colleagues, by actively producing thought leadership resources to support their learning. Jason provides strategic and commercial tax advice to a broad range of public and private corporate clients, assisting them on all tax compliance and consulting matters. He has supported clients to manage tax effect accounting requirements, tax risk and governance matters, and to improve tax processes and systems. Jason has also had detailed involvement in preparing and reviewing reconciliations between A-IFRS and US GAAP for ASX Top 200 clients.
Jason joined BDO, as Partner, in 2014. He has over 15 years’ experience as a tax professional, working with Big 4 accounting firms.