June 12, 2012
Levies charged on entities that operate in a specific market
A public authority may impose a levy on entities that operate in a specific market, such as a specific country, a specific region or a specific market in a specific country. Recently, the IFRS Interpretations Committee was asked to consider how an entity would account for the payment of levies, other than income taxes, in its financial statements; specifically, when the liability to pay a levy should be recognized. The proposed guidance clarifies that the obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy as identified by the legislation. For example, if the activity that triggers the payment of the levy is the generation of revenues in the current period and the calculation of that levy is based on revenues generated in a previous period, the obligating event for that levy is the generation of revenues in the current period.
Draft Interpretation DI/2012/1, Levies Charged by Public Authorities on Entities that Operate in a Specific Market, addresses the accounting for levies that are recognized in accordance with the definition of a liability that is provided in International Accounting Standard (IAS) 37, Provisions, Contingent Liabilities and Contingent Assets. The draft Interpretation does not address the accounting for: (a) income taxes that are within the scope of IAS 12, Income Taxes; (b) levies that are due only if a minimum revenue threshold is achieved; (c) fines or other penalties imposed for breaches of the legislation; and (d) contracts between a public authority and a private entity. Levies within the scope of this draft Interpretation have the following characteristics:
The draft Interpretation is open for public comment until September 5, 2012.
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