IFRIC interpretations are developed by the IFRS interpretations committee to provide requirements on specific application issues and are ratified by the board.

In this case, it may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept a company’s tax treatment.

IAS 12 Income Taxes specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. IFRIC 23 provides requirements that add to the requirements in IAS 12 by specifying how to reflect the effects of uncertainty in accounting for income taxes.

The interpretation is to be applied to the determination of taxable profit, tax bases, unused tax losses unused tax credits and tax rates, where there is uncertainty over income tax treatments under IAS 12.

An entity is required to use judgement to decide whether each tax treatment should be considered independently or whether some tax treatments should be considered together. It also needs to consider whether it is probably that the relevant authority will accept each tax treatment, or group of tax treatments, that is used, and will need to consider the effect of changes in facts and circumstances.

The interpretation is effective from 1 January 2019.

Details of IASB’s work on IFRIC 23 are here.