Tax effect of distribution to holders of equity instruments and transaction costs

IAS 32, Financial Instruments: Presentation

• Addresses perceived inconsistencies between IAS 12 ‘Income Taxes’ and IAS 32 with regards to recognizing the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction

• Clarifies that the intention of IAS 32 is to follow the requirements in IAS 12 for accounting for income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction. IAS 12 requires the recognition of the income tax consequences of dividends in profit or loss except to the extent that the tax arises from a business combination or from a transaction which is recognized outside profit or loss (either in other comprehensive income or directly in equity).

Accounting Alert – June 2012

Punongbayan and Araullo