News regarding IAS 12
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The IASB (International Accounting Standards Board) published the interpretation IFRIC 23 “Uncertainty over Income Tax Treatments” in order to regulate the requirements relating to the recognition and measurement referred to in IAS 12 “Income taxes”, if there is uncertainty about the correct tax treatment. Therefore, with respect to the financial statements for the financial years started as at 01.01.2019, IAS 12 must be applied considering the interpretation given by IFRIC 23, whose obligation is established by the Regulation no. 2018/1595, October 23rd 2018.
For this reason, when evaluating the effect related to an uncertain tax treatment (uncertain tax position) with respect to the determination of taxable income, as well as the definition of tax-relevant values, the tax payer will have to assess whether it is likely that the uncertain tax treatment is accepted by the tax authorities (assuming that the latter can verify the amounts and examine all available information).
In case it is considered likely that the competent authority accepts the uncertain tax treatment, the taxable income and the tax values will have to be determined by considering such treatment. On the contrary, if it is deemed that the uncertain treatment may not be accepted by the tax authorities (more than 50% probability that there is a dispute in this regard), then this uncertainty must be reflected in the determination of the taxable income and other tax values.
IFRC 23, in this regard, identifies two methods of application:
1) most likely amount: the amount that among the various possible outcomes is more likely to occur;
2) expected value: the sum of the different possible amounts weighted by the relative probability coefficient.
In the first application phase, the tax payer must apply the interpretation IFRIC 23 or retroactively in compliance with the provisions of IAS 8, or retroactively, but accounting for the cumulative effect of the initial application detected at the opening date of the year in which the first application takes place (in the latter case only, the subject must not reformulate the comparative information).
It should also be noted that this regulation relates to IRES and IRAP, both current and deferred.