Tax Implications of IFRS.ppt

8/20/2019 Tax Implications of IFRS.ppt

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AgendaIAS 23- Borrowing CostsIAS 21- The Efects o Changes in Foreign

Exchange RatesIAS 19- E !"o#ee Bene$ts %Re&ised'IAS ()- In&est ent *ro!ert#IAS (1- Agric+"t+reIAS 1,- *ro!ert# *"ant and E.+i! entIAS 3/- Intangi0"e AssetsIAS 3 - *ro&isions and Contingencies


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AgendaIAS 1 - easesIAS 3,- I !air ent o Assets

IAS 2- In&entoriesIAS 39 IFRS 9- Financia" Instr+ entsIAS 2/- In&est ent in Associates

IFRIC 14- Re&en+e- Rea" Estate 5e&e"o!erIAS /- Acco+nting ChangesIFRS 1- First-ti e Ado!tion

IAS 12- Inco e Tax


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IAS 23- Borrowing costsStatement of nancial position accountsa ected:

PPEInvestment propertIntangi!le asset

Income statement accounts a ected

Inventor"inance costs"inance income


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IAS 23- Borrowing #ostsAccounting Taxation

Borrowing costs s$all !erecogni%ed as e&pense int$e period in w$ic$ t$e areincurred' Borrowing costsincurred in connection wit$t$e construction orproduction of a (ualif ing

asset s$all !e capitali%ed aspart of t$e cost of t$e asset'Interest earned on idle fundis treated as a reduction of!orrowing costs

Interest incurred to ac(uirepropert used in trade or!usiness ma !e allowed asa deduction or treated as acapital e&penditure ) Sec'3* of +I,#'Interest earned is recogni%ed

as ta&a!le income'A portion of interest e&penseis considered non-deducti!leif an entit $as interestincome su! ect to nal ta&


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IAS 2.- "oreign E&c$angeStatement of nancial position accountsa ected:

#as$ and cas$ e(uivalents,eceiva!lesPa a!les


"oreign currenc gains and lossesStatement of compre$ensive income accountsa ected:

"oreign currenc translation ad ustment


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IAS 2.- "oreign E&c$angeAccounting Taxation

/ransaction is translatedinto functional currencat t$e spot rate at t$edate of t$e transaction

0onetar assets andlia!ilities are translatedusing t$e closing rate asof t$e "S date'

"or conversion of foreigncurrenc to P$P1 t$eprevailing inter!anreference rate s$all appl) ,0# 2 -45"oreign e&c$ange gains

and losses arerecogni%ed onl w$ent$e are actuallreali%ed'


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IAS 2.- "oreign E&c$angeAccounting Taxation

"unctional #urrenc ist$e currenc of t$eprimar economicenvironment in w$ic$ t$eentit operates

/$e use of 6S dollars asa functional currenc isallowed since t$e use offoreign currenc isrevenue neutral- BI,

,uling *-2773


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IAS *7- InvestmentpropertStatement of nancial position accounts

a ected:Investment propert

Income statement accounts a ected"air value ad ustments- 8ains and losses9epreciation e&pense

8ain or loss on disposal of investment propert


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IAS *7- InvestmentpropertAccounting Taxation

,eal propert $eld ! anentit for capitalappreciation or for rental'

Investment propert ma !eaccounted for using t$e costmodel or t$e " model

8ain or loss is recogni%ed fort$e di erence !etween t$e# and net proceeds fromdisposal

Investment propert ;IP< $eldfor capital appreciation is a

capital asset w$ile IP $eld forrental is an ordinar asset'9epreciation is allowed for IPt$at (uali es as ordinarasset' #$anges in " areignored'#apital gains ta& s$all applfor capital assets w$ile gainsand losses on ordinar assetsare ta&a!le=deducti!le upondisposal'


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IAS .>- Emplo ee!ene tsStatement of nancial position accounts

a ected:Accrued pension costsPrepaid pension costs

Income statement accounts a ectedSalaries and wages

Pension e&penseStatement of compre$ensive income accountsa ected:

Actuarial gains and losses


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IAS .>- Emplo eeBene tsAccounting Taxation

S$ort-term emplo ee!ene ts include:

?ages and salaries andallowances#ompensated a!sencesBonuses

+on-monetar !ene tssuc$ as medical care1$ousing1 cars1 su!sidi%edgoods or services

,easona!le allowance forsalaries1 wages and ot$erforms of compensationfor personal servicesrendered1 includinggrossed-up monetar

value of fringe !ene tsare deducti!le pursuantto Sec' 3* of +I,#provided t$e related ?/and "B/ $ave !een paid'


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IAS .>- Emplo eeBene tsAccounting Taxation

,etirement !ene te&pense includes:

Service costs+et interest cost

/$e amount of deducti!lee&pense depends onw$et$er t$e plan isregistered wit$ t$e BI, ornot'

,egistered- Actualcontri!ution normal costw$ile contri!ution for pastservice cost is amorti%edover .7 ears+ot registered- Actualretirement !ene ts paid


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IAS *.- AgricultureStatement of nancial position accountsa ected:

Biological assetsInventor

Income statement accounts a ected" ad ustments- gains and losses

Sales revenue#ost of goods sold


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IAS *.- AgricultureAccounting TaxationBiological assets areliving plants and animals'

Initial measurement- "less cost to sell#osts incurred inmanagement of!iological transformation-E&pense immediatelSu!se(uentmeasurement- " lesscost to sell

@ivestoc assets aremeasured at cost'


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IAS . - Propert 1 plantand e(uipmentStatement of nancial position accounts

a ected:Propert 1 plant and e(uipment

Income statement accounts a ected9epreciation e&penseImpairment loss

,ecover from impairmentStatement of compre$ensive income accountsa ected:

,evaluation surplus


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IAS . - Propert 1 Plantand E(uipmentAccounting Taxation

#ost of PPE includesPurc$ase price9irectl attri!uta!lecostsEstimateddismantling=restoration

costs

8enerall 1 cost of PPEfor ta& purposes wouldinclude purc$ase priceand related e&pensesnecessar to !ring t$ePPE to its usa!le

condition'9ismantling costs arededucti!le in t$e eart$e are incurred


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/$e deprecia!le amount ofan asset s$all !e allocatedon a s stematic !asis overits useful life'A c$ange in depreciationmet$od is treated as ac$ange in accountingestimateEac$ part of an item of PPEwit$ a cost t$at issigni cant in relation to t$etotal cost of t$e item s$all!e depreciated separatel

A reasona!le allowancefor depreciation is allowedto !e deducted fromgross income'

A c$ange in depreciation

met$od re(uires approvalfrom t$e BI,+o speci c re(uirementregarding componentdepreciation'


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PPE ma !e accountedfor using t$e cost modelor t$e revaluation modelAn item of PPE isderecogni%ed upondisposal or w$en no

future economic !ene tsare e&pected from its useor disposal' 8ain or lossfrom derecognition isrecogni%ed in P @'

PPE is accounted for atcost'

8ain or loss on sale ofPPE is ta&a!le ordeducti!le'


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IAS 34- Intangi!le assetsStatement of nancial position accountsa ected:

Intangi!le assetsIncome statement accounts a ected

Amorti%ation e&pense,esearc$ and development costs

rgani%ational e&pensesStatement of compre$ensive income accountsa ected:

,evaluation surplus


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IAS 34- Intangi!le AssetsAccounting Taxationrgani%ational costs are

e&pense immediatel

,esearc$ costs aree&pensed immediatelw$ile development costs

are capitali%ed w$encertain criteria are met

rgani%ational costs areamorti%ed over 7mont$s and are notdeducti!le in full in t$e

ear incurred',esearc$ and

development costs can!e recogni%ed ase&pense immediatel oramorti%ed over a periodof not less t$an 7

mont$s


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IAS 34- Intangi!le AssetsAccounting TaxationIntangi!le assets wit$

nite lives are amorti%edover t$eir estimateduseful lives

Intangi!le assets wit$

inde nite life s$all not !eamorti%ed'8oodwill is not amorti%ed!ut tested at "S date forpossi!le impairment invalue

Intangi!les1 t$e use ofw$ic$ is limited in duration1ma !e t$e su! ect of a

depreciation allowance'Intangi!les t$e use ofw$ic$ in t$e !usiness ortrade is not so limited1 willnot !e su! ect to suc$ anallowance'8oodwill is not su! ect toamorti%ation' An gain orloss can !e reali%ed w$ent$e same !usiness is sold'


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IAS 3C- Provision andcontingenciesStatement of nancial position accounts

a ected:Provisions

Income statement accounts a ected?arrant e&penseEstimated losses


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IAS 3C-Provision and#ontingenciesAccounting Taxation

Provision is recogni%edw$en

t$e entit $as a presento!ligationDit is pro!a!le t$at anout ow of economicresources will !e re(uiredD

anda relia!le estimate of t$eamount of o!ligation can!e made

#ontingent assets and

lia!ilities are not recogni%ed

E&penses related to t$eprovisions are notdeducti!le for income ta&purposes'

Income or e&penses relatedto contingent assets orlia!ilities are not ta&a!le

and not deducti!le'


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IAS .C- @eases- operatingleaseStatement of nancial position accounts

a ected:Prepaid rent6nearned rent

Income statement accounts a ected,ent e&pense


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IAS .C- @eases- "inanceleaseStatement of nancial position accounts

a ected:Propert and e(uipment@ease receiva!le=pa a!le

Income statement accounts a ected9epreciation e&pense

Interest income=e&penseSales revenue#ost of goods sold


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IAS .C- @easesAccounting Taxation@ease can classi ed asan

perating leaseD or"inance lease'

@ease can eit$er !e@easeD or#onditional sale


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IAS .C- @easesAccounting Taxationperating @ease- @essor

,ental income isrecogni%ed on a straig$t-line !asis over t$e leaseterm'Advance rent isrecogni%ed as a lia!ilit

@ease ) @essor@essor s$ould report asincome onl t$e leasepa ments t$at it isentitled to receive for t$e

ear'Advance rent is ta&a!le in

t$e ear it is received'#osts related to t$eleased propert t$at aret$e responsi!ilit of t$elessor !ut paid ! t$e

lessee are deemedadditional lease income'


29/45

IAS .C- @easesAccounting Taxationperating @ease- @essee

,ental e&pense isrecogni%ed on a straig$t-line !asis over t$e leaseterm'

@ease ) @essee@essee ma deduct onlt$e amount of rentactuall due1 under t$elease agreement1 duringt$e ear'#osts related to t$eleased propert t$at aret$e responsi!ilit of t$elessor !ut paid ! t$elessee are deemedadditional leasee&pense'


30/45

IAS .C- @easesAccounting Taxation"inance lease-

,ental pa ments aretreated as installmentpa ments for t$eac(uisition of asset9epreciation andinterest e&pense isrecogni%ed ! t$e lessee

#onditional sale /$e amounts paid to t$evendor will !econsidered as pa mentsw$ic$ are part of t$epurc$ase price9epreciation andinterest e&penses arededucti!le for ta&purposes


31/45

IAS 3 - Impairment ofassetsStatement of nancial position accounts

a ected:Propert and e(uipmentInvestment propertIntangi!le assets


Impairment loss,eversal of impairment


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IAS 3 - Impairment ofassetsAccounting Taxation

An impairment loss isrecogni%ed in P @w$enever t$e carr ingamount of an asset isgreater t$an itsrecovera!le amount'

@oss actuall sustained ina completed transaction1s$all !e allowed asdeduction'

/$us1 impairment lossunder IAS 3 is notdeducti!le unless t$eta&pa er can clearl s$owt$at due to t$e e ect ofeconomic conditions1 anitem of PPE will $ave to !ea!andoned prior to t$eend of its useful life'


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IAS 2- InventorStatement of nancial position accountsa ected:

Inventor

Income statement accounts a ectedImpairment loss,eversal of impairment


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IAS 2- InventorAccounting Taxation #ost of inventor s$allcover all costs incurred in!ringing t$e inventor toits present location andcondition'An impairment loss is

recogni%ed in P @ w$ent$e +, of inventor islower t$an its cost'

Basicall 1 t$e costdetermined foraccounting purposes ist$e same as t$e cost forta& purposes'

nl losses reali%ed from

actual disposition ordestruction of inventorcan !e claimed as adeduction


35/45

IAS 3>=I",S >- "inancialInstrumentsAccounting Taxation

"inancial assets areinitiall measured at "

"inancial assets aresu!se(uentl measuredat " or amorti%ed costs

Impairment loss oncertain nancial assets isrecogni%ed w$en t$ere isan o! ective evidencet$at t$e asset is impaired

"inancial assets aremeasured at contractedamount'"inancial assets aremeasured at cost oramorti%ed cost' /$us1c$anges in " are notta&a!le and not deducti!le'

@oss is allowed onl onclosed and completedtransactions'


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IAS 3>- "inancialinstrumentsStatement of nancial position accounts a ected:

"inancial assets"inancial lia!ilities

Income statement accounts a ected6nreali%ed gains and lossesInterest incomeInterest e&pense

Statement of compre$ensive income accountsa ected:

6nreali%ed gains and losses


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IAS 3>=I",S >- "inancialInstrumentsAccounting Taxation

9ividend income on cas$and propert dividend isrecogni%ed in P @

Interest income andinterest e&pense arerecogni%ed !ased one ective interest met$od'Impairment loss on certain

nancial assets isrecogni%ed w$en t$ere isan o! ective evidence t$att$e asset is impaired

9ividend received fromdomestic corporation isnot su! ect to income ta&w$ile dividend receivedfrom foreign corporation ista&a!leInterest income ande&pense are ta&a!le anddeducti!le e&cept imputedinterest'@oss is allowed onl onclosed and completedtransactions'


38/45

IAS 24- Investment inassociatesStatement of nancial position accounts

a ected:Investment in associates

Income statement accounts a ectedS$are in investeeFs income=losses9ividend income

Statement of compre$ensive income accountsa ected:

S$are in investeeFs #I


39/45

IAS 24- Investment inAssociatesAccounting Taxation

Investment in associatess$all !e accounted forusing t$e e(uit met$od'

/$e di erence !etweent$e # and net sellingprice is recogni%ed in P @Investment accountincreases w$en t$einvestor s$ares in t$e netincome of investee 9ividends received aretreated as return ofinvestment

Investment in associatesis accounted for at cost'8ain on disposal issu! ect to capital gains of5G to .7G or H of .G'

S$are in net income isnot recogni%ed'

9ividends from domesticcorporation are notta&a!le


40/45

I",I# .5- ,evenue of ,ealEstate 9eveloperAccounting Taxation

,evenue is recogni%edeit$er

At t$e point of saleD orAs t$e services areperformed ;Stage of#ompletion<

,evenue is classi edeit$er

Installment saleD or#as$ sale


41/45

IAS 4- Accounting#$angeAccounting Taxation

#$ange in estimatesresults from newinformation or newdevelopments' Impact isrecogni%ed prospectivel ' #orrection of prior

period errors re(uiresretrospectiverestatement'

#$ange in estimates a ectsta& calculation

prospectivel '

I/, for t$e ears a ecteds$ould !e amended'Amendment is allowedwit$in 3 ears from t$edate of prescri!ed ling1provided no @oA for a ta&investigation $as !eenserved to t$e ta& pa er


42/45

IAS 4- Accounting#$angeAccounting Taxation

#$ange in accountingpolic generall re(uiresretrospective application'

6nder ,, 2-*71 BI,approval is re(uired forc$anges in accountingmet$od' Application forpermission to c$ange t$emet$od of accountings$all !e led wit$in >7da s after t$e !eginningof t$e ta&a!le ear to !ecovered ! t$e return'


43/45

I",S .- "irst timeAdoptionAccounting Taxation

#umulative e ect of t$etransition from old 8AAPto I",S s$all !e treatedas an ad ustment of t$eopening ,etainedEarnings'

E ect of transition toI",S is not included int$e determination ofimproperl accumulatedearnings ta&'


44/45

IAS .2- Income ta&Income ta& e&pense must includecurrent ta& e&penseD and9eferred ta& e&pense

9eferred ta& arises from temporardi erences1 + @# 1 and E&cess 0#I/


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Tax Implications of IFRS.ppt