The Interpretations Committee received a request to clarify the recognition of a tax asset in the situation in which tax laws require an entity to make an immediate payment when a tax examination results in an additional charge. In the situation described by the submitter, the entity expects, but is not certain, to recover some or all of the amount paid.
The Interpretations Committee noted that:
- paragraph 12 of IAS 12 provides guidance on the recognition of current tax assets and current tax liabilities.
- in the specific fact pattern described in the submission, an asset is recognised if the amount of cash paid (which is a certain amount) exceeds the amount of tax expected to be due (which is an uncertain amount).
- the timing of payment should not affect the amount of current tax expense recognised.
The Interpretations Committee noted that paragraph 88 of IAS 12 provides guidance on disclosures required for such items only, and that IAS 12 provides the relevant guidance on recognition.
In the light of existing IFRS guidance, the Interpretations Committee concluded that the agenda criteria are not met and decided to remove the issue from its agenda.