IFRS introduction

By Tolley
IFRS introduction

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • IFRS introduction
  • Scope of IAS 12
  • Current tax
  • Deferred tax
  • When tax charge is recognised outside of profit and loss
  • Uncertain tax positions (UTPs) and tax exposures under IFRS
  • Discounting deferred tax

Reporting of income taxes under IFRS is subject to the accounting standard IAS 12. Access to an ‘unaccompanied’ version of IAS 12 is currently available by registering here  from the IAS 12 summary page. Full access to the standards is only available by subscription to the IFRS Foundation.

The version of IFRS used in the UK is IFRS as endorsed by the EU.

It is highly likely that IFRS standards in some form will continue to be used by the largest companies in the UK after leaving the EU although the Government has not yet confirmed this. Possible versions of IFRS which might be used after the UK leaves the EU could include:

  • IFRS as endorsed by the EU (ie no change from the current situation)
  • IFRS as issued by the International Accounting Standards Board (IASB) ― as used generally outside the EU
  • IFRS as endorsed by the UK itself via a body such as the Financial Reporting Council (FRC) who currently have input into the European financial reporting advisory group (EFRAG) ― see below
Scope of IAS 12

According to IAS 12, para 2:

“income taxes include all domestic and foreign taxes which are based on taxable profits. Income taxes also include taxes, such as withholding taxes, which are payable by a subsidiary, associate or joint venture on distributions to the reporting entity.”

The IASB has intentionally not published guidance on which specific taxes fall within this definition. It is important to determine whether specific taxes that a company pays are income taxes or not because:

  • only income taxes can be reported within the tax line in the income statement. Other taxes are reported elsewhere in the income statement, for example, in cost of sales or administrative expenses.
  • deferred taxes can only be calculated based on the rules

More on Deferred tax and tax disclosures under IFRS: