There will be no major changes to the current model for accounting for income tax following feedback from a consultation by European and UK regulators, even though there is widespread recognition that the present requirements are highly complex to understand and use.

The European Financial Reporting Advisory Group (EFRAG) and the Financial Reporting Council (FRC) have published a feedback statement Improving the Financial Reporting of Income Tax based on responses to their discussion paper.

This showed that the majority of respondents agreed that the current accounting standard IAS12 is complex to apply and supported attempts to simplify its requirements. Almost all said that its deficiencies were on both a conceptual and an application level.

However, commentators also felt that the standard is not fundamentally flawed and is generally well-understood by preparers and users of financial statements. There were worries that a fundamental change to the existing model could introduce further complexity and might fail to satisfy user needs.

The few respondents that supported a complete rethink of IAS 12 favoured the accruals approach outlined in the discussion paper and wanted to see income tax accounting based on a principle that requires tax assets and liabilities to be recognised in accordance with the recognition criteria under the International Accounting Standards Board's (IASB's) Conceptual Framework.

EFRAG and the FRC will now liaise with the IASB on the outcome of the consultation, but said the most likely outcome would be limited improvements to the standard to address deficiencies. They said they do not plan to undertake further proactive work on the matter.