A levy is defined as an outflow of resources (embodying economic benefits) that is imposed by governments (including government agencies and similar bodies whether local, national or international) on entities in accordance with legislation (i.e., laws and/or regulations).
When do I record a liability to pay a levy? Accounting for government levies
- 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.
- The activity that triggers payment may occur “over time” (e.g., revenue generating activities occurring during a year) or be at a “point-in-time” (e.g., a specified date or when a transaction occurs).