ASCG Interpretation 4 (IFRS) adopted

Yesterday, the ASCG’s IFRS Technical Committee adopted the ASCG Interpretation 4 (IFRS) Accounting for Interest and Penalties Related to Income Taxes under IFRSs unanimously.

The Interpretation addresses the accounting for interest and penalties related to taxes within the meaning of section 3(4) of the AO (Abgabenordnung, Fiscal Code of Germany) that relate to current income taxes within the meaning of IAS 12.5 (interest and penalties related to income taxes) in financial statements prepared in accordance with IFRSs, as adopted by the EU.

According to the Interpretation, interest and penalties related to income taxes shall be accounted for in accordance with IAS 37. If an entity changes its accounting treatment because of this Interpretation, the lack of previous guidance means that this does not constitute the correction of an error, but rather a change in its accounting policy within the meaning of IAS 8.

Before the adoption of the Interpretation, the IFRS Technical Committee intensively discussed and acknowledged the – in part critical – comments on the Exposure Draft of ASCG Interpretation (IFRS) 1 published on 16 July 2018.

In order to clarify the decision-making process of the IFRS Technical Committee, it decided to summarize its feedback on the comments in a separate paper and to publish it presumably in October 2018.

The text of the Interpretation essentially corresponds to the Draft with a few editorial changes in paragraphs 8, 10 and B7. Furthermore, the sentences 5 and 6 in paragraph B6 have been deleted.