IFRIC 23: Uncertainty over Income Tax Treatments – Still a sleeper for some

New guidance with respect to accounting for uncertain tax positions is in effect for periods beginning on or after 1 January 2019 in the form of IFRIC 23. However, anecdotal evidence suggests that the requirements of IFRIC 23 have so far been overshadowed by major changes to other accounting standards in 2018 and 2019, specifically revenue recognition, financial instruments and leasing.

Many corporates are still unprepared to provide sufficient appropriate audit evidence required to document their judgements, thinking and processes around IFRIC 23. Further, audit teams may be underprepared in terms of having a clear understanding of the audit process required to undertake their testing, and may have neglected to scope in the necessary level of specialist review as part of their planning meetings.


While the first full year audits under IFRIC 23 are not scheduled to be completed until early 2020, the key issue from a timing perspective arises from the complexity of the process required to address the requirements. The complexity arises from the combination of implementing a new process to identify and document uncertain tax positions, together with the subjectivity of the analysis required, particularly in respect of transfer pricing and R&D related matters.

Immediate actions – corporates

For corporates, the immediate actions are to understand their obligations in terms of determining an appropriate unit of account and applying critical analysis to assess and document each uncertain tax position identified in a manner that is consistent with the requirements under IFRIC 23. This may require engaging specialists to provide opinions with respect to uncertain issues (typically independent from the auditors) who can assist in identifying and evaluating subjective positions and preparing the necessary documentation.

Immediate actions – auditors

For auditors, the immediate actions to undertake are to review their updated audit procedures with respect to IFRIC 23 to obtain an understanding of the documentation requirements and required audit steps. Audit teams should also engage early with their internal tax specialists to scope in specialist tax input as part of the planning process, and provide the necessary time to complete the necessary analysis and procedures. With some complex positions, this will take a matter of weeks rather than days.

Parallels to US requirements

The new guidance has a number of parallels with the requirements introduced in the US under FIN 48. The introduction of FIN 48 required significant amounts of resource on behalf of corporates and advisors to identify and document the range of uncertain tax positions in advance of the financial statement audit.

The key learning from the introduction of FIN 48 is that if New Zealand corporates do not engage with this process in a timely fashion, it may be too late to do so in a controlled manner.

How can BDO assist with IFRIC 23?

Our experts 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 your local BDO representative if you require assistance.