Tentative Agenda Decision and comment letters—IAS 12 Interest and penalties related to income taxes


The IFRS Interpretations Committee tentatively decided not to add this matter to its standard-setting agenda at its meeting in March 2017. The Committee will reconsider the following tentative agenda decision, including the reasons for not adding the matter to the standard-setting agenda, at a future meeting. The Committee encourages interested parties to submit their responses using the link below.

Tentative agenda decision

IFRS Standards do not specifically address the accounting for interest and penalties related to income taxes (interest and penalties). Respondents to the draft IFRIC Interpretation Uncertainty over Income Tax Treatments said that entities apply either IAS 12 or IAS 37 Provisions, Contingent Liabilities and Contingent Assets to interest and penalties.

In the light of this feedback, the Committee considered whether to add a project on interest and penalties to its standard-setting agenda.

On the basis of its analysis, the Committee concluded that a project on interest and penalties is not a higher priority than other projects already on the Board’s or Committee’s agenda. Consequently, the Committee [decided] not to add a project on interest and penalties to its standard-setting agenda.

Nonetheless, the Committee observed the following:

  1. if an entity determines that amounts payable or receivable for interest and penalties are income taxes, then the entity applies IAS 12 to those amounts. If an entity does not apply IAS 12 to interest and penalties, then it applies IAS 37 to those amounts;
  2. paragraph 79 of IAS 12 requires an entity to disclose the major components of tax expense (income); for each class of provision, paragraphs 84-85 of IAS 37 require a reconciliation of the carrying amount at the start and end of the reporting period as well as various other pieces of information. Accordingly, regardless of whether an entity applies IAS 12 or IAS 37 when accounting for interest and penalties related to income taxes, the entity would disclose information about those interest and penalties if it is material; and
  3. paragraph 122 of IAS 1 Presentation of Financial Statements requires disclosure of the judgements that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

The Tentative Agenda Decision was open for comment until 22 May 2017.


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