Income tax accounting

The European Financial Reporting Advisory Group (EFRAG) has published a discussion paper Improving the Financial Reporting of Income Tax which responds to criticisms about the usefulness and complexity of IAS 12, Income Taxes. The paper examines whether IAS 12 should be improved or replaced but offers few recommendations.

The discussion paper begins by asking why accounting for income taxes is so complex. It suggests three reasons: differences between financial reporting and taxation requirements for the same items; operations in different jurisdictions; and management incentives to minimise tax payments.