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Respondents generally welcomed the Discussion Paper as an introduction to an important debate. Most agreed that the current accounting standard, IAS 12, is complex to apply and supported attempts to simplify its requirements. Almost all respondents said that its deficiencies were on both a conceptual and an application level. However, they also felt that the standard is not fundamentally flawed and is generally well-understood by preparers and users of financial statements. A fundamental change to the existing model for the accounting for income tax may therefore add further complexity and may not satisfy user needs. The best way forward would be to address the deficiencies through limited improvements to the standard.
The few respondents that supported a complete rethink of IAS 12 expressed support for the accruals approach outlined in Part 2 of the Discussion Paper. According to them, income tax accounting should be based on a principle that requires tax assets and liabilities to be recognised in accordance with the recognition criteria under the IASB’s Conceptual Framework.
EFRAG and the FRC will now liaise with the IASB on the outcome of the consultation. They will encourage the IASB to address constituents' issues either through amendments to the current standard, or its future research project on income taxes. However, EFRAG and the FRC do not plan to undertake further proactive work on the matter.