Corporate income tax is an important topic in the annual accounts of companies that are subject to income tax in multiple jurisdictions. Significant judgement and a high degree of estimation may be required to determine the world-wide provision for taxes. Macro-economic factors and other events such as Brexit, US tax reform and OECD initiatives related to base erosion and profit shifting (BEPS) can hugely impact companies’ tax exposure.
IAASA, Ireland’s accounting enforcer, has conducted a desk-top review of the tax accounting practices of a range of listed companies. The review reveals that for almost 2 in every 3 companies selected, corporate income taxes were a principal risk and uncertainty and a source of estimation uncertainty.
The survey, the results of which are available here, provides IAASA’s observations on the disclosure of the effective tax rate, the tax reconciliation disclosed in the notes to the annual accounts, and the disclosure of uncertain tax positions (UTPs).
IAASA expects that publication of the results of this desk-top survey will assist companies in providing more transparency in their corporate income tax disclosures in their annual accounts.