Income tax

Comments from ACCA to the International Accounting Standards Board, July 2009.

Income taxes

ACCA is pleased to have this opportunity to comment on the exposure draft (ED) on the above subject which has been considered by ACCA's Financial Reporting Committee.

We note that the introduction to the ED outlines the main objectives of the project, which include reducing the differences between the IASB's IAS12 and the FASBs FAS109 dealing with income taxes, as well as simplifying the requirements of the standards. We fully support both these objectives but do not believe that these goals are likely to be achieved through the proposals in the ED. We also question the timing of this project. The Boards, and their stakeholders, are currently faced with several other significant projects which are critical to resolving concerns arising from the on-going global financial crisis. 


While we support convergence with US GAAP in principle, we have previously stressed that we would only support changes to IFRS which offer significant improvement. We do not believe that the ED as drafted offers such improvement.

Also, we question whether the proposals will result in a truly converged standard in any case, as the ED too acknowledges that certain differences will remain. In this regard, we do not believe it is helpful for the FASB to have ‘suspended indefinitely' their deliberations on a project which it is hoped will result in a converged standard.

Improvement and simplification

We fully support simplification of financial reporting wherever appropriate. We also recognise that the accounting for income taxes through IAS12 does need review. We note that the UK's Accounting Standards Board (ASB) and the German standard-setter are currently working on a joint project which offers a more fundamental review of tax accounting.

While some of the proposals would be improvements to the current standard - such as the clarifying guidance on uncertain tax positions - and do suggest a more structured future standard, overall we do not believe that the ED offers significant improvements to current IFRS. Indeed, we are particularly concerned with the following aspects of the proposals

  • The tax base being determined on a ‘sale' assumption, rather than an expected use assumption,
  • Elimination of the initial recognition approach, and its replacement by a more rules based approach, which will likely add further complexity, without necessarily improving the resulting information,
  • Apparent inconsistencies in terms of the principles, especially with regards the use of management judgement. This is evident in relation to the ruling out of judgement about an item's intended use when determining an item's tax basis, compared to the explicit need to apply such judgement when measuring the related tax asset / liability.

Given our concerns, we do not support the ED and would prefer a more fundamental review of the accounting for income taxes and a postponement of further consideration of this topic by IASB until the current priorities are satisfactorily resolved. Accordingly we have not commented on the specific questions raised in the ED. 

Last updated: 12 Apr 2012