diff --git a/python/cudf/cudf/core/_compat.py b/python/cudf/cudf/core/_compat.py
index 0fedfcabb46..807e96f2c38 100644
--- a/python/cudf/cudf/core/_compat.py
+++ b/python/cudf/cudf/core/_compat.py
@@ -7,3 +7,4 @@
 PANDAS_GE_100 = PANDAS_VERSION >= version.parse("1.0")
 PANDAS_GE_110 = PANDAS_VERSION >= version.parse("1.1")
 PANDAS_GE_120 = PANDAS_VERSION >= version.parse("1.2")
+PANDAS_EQ_123 = PANDAS_VERSION == version.parse("1.2.3")
diff --git a/python/cudf/cudf/tests/test_setitem.py b/python/cudf/cudf/tests/test_setitem.py
index fc885a13808..4d2e2a4b33b 100644
--- a/python/cudf/cudf/tests/test_setitem.py
+++ b/python/cudf/cudf/tests/test_setitem.py
@@ -5,7 +5,7 @@
 import pytest
 
 import cudf
-from cudf.core._compat import PANDAS_GE_120
+from cudf.core._compat import PANDAS_EQ_123, PANDAS_GE_120
 from cudf.tests.utils import assert_eq, assert_exceptions_equal
 
 
@@ -21,9 +21,8 @@ def test_dataframe_setitem_bool_mask_scaler(df, arg, value):
 
 
 @pytest.mark.xfail(
-    condition=not PANDAS_GE_120,
-    reason="pandas incorrectly adds nulls with dataframes "
-    "but works fine with scalars",
+    condition=PANDAS_EQ_123 or not PANDAS_GE_120,
+    reason="https://github.com/pandas-dev/pandas/issues/40204",
 )
 def test_dataframe_setitem_scaler_bool():
     df = pd.DataFrame({"a": [1, 2, 3]})