IFRIC 23

IFRIC 23 – A practical approach to implementation

With the first period upon us where IFRIC 23 Uncertainty over Income Tax Treatments applies (i.e. annual periods commencing on or after 1 January 2019), boards and management should be turning their focus towards the practical steps required to address the implementation of the new requirements.

In this regard, BDO has developed the following step plan based on engagements with early adopters of the interpretation:

  1. Internal communication and education – This is a necessary step to obtaining stakeholder buy-in and freeing up the necessary resources for what can be a complex process.
  2. Formulation of an implementation plan – Depending on the volume of uncertain tax positions that a group has, preparation of a detailed implementation plan can provide structure to the process assisting in timely completion prior to the completion of the audit.
  3. Identification of all uncertain tax positions – This critical step is fundamental to the success of the overall project, with all potentially uncertain tax positions requiring identification for further analysis.
  4. Assess and develop supporting documentation – Preparation of this documentation is critical when the audit process commences because the auditors are required to address whether ‘sufficient appropriate audit evidence’ has been provided to allow them to conclude on the accuracy of the financial statements.
  5. Prepare draft financial statement presentation and disclosures – The level of disclosures will vary depending on the type of financial statements required, however the general guide is that an increased level of disclosure (quantitative and qualitative) is likely to be required.
  6. Change or develop internal controls – To ensure that uncertain tax positions are identified and appropriately documented on a real-time basis going forwards, as this will create an easier audit process in future with no risk of omissions.
  7. Revisit tax planning – This step may be a natural follow-on from the identification process, where the group may ask whether they wish to ‘unwind’ existing uncertain tax positions, particularly given their disclosure under IFRIC 23.
  8. Determine an appropriate process for ongoing compliance – If not fully addressed by the changes in internal controls, this may involve expanding existing role descriptions to ensure that uncertain tax positions are appropriately considered and evaluated by senior personnel.

With audit planning meetings having commenced already for a number of groups with 31 December year-ends, this practical step-based approach should be implemented as a matter of haste, particularly where insufficient time has been devoted to addressing the requirements of IFRIC 23 to date.

How can BDO assist?

Our experts at BDO have in-depth experience in the introduction and application of similar accounting requirements and recommend that you consider engaging an advisor who can both provide you with a clear road map to meet your obligations under the Interpretation and best represent your interests in an audit scenario.

Please contact a member of the relevant BDO team if you require assistance:

IFRS Advisory
Transfer Pricing
Corporate and International Tax
R&D

More information

For more information on IFRIC 23, please refer to our previous Accounting News articles in August 2019, June 2019 and July 2017.