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8/20/2019 Tax Implications of IFRS.ppt
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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
Income statement accounts a ected
"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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IAS . - Propert 1 Plantand E(uipmentAccounting Taxation
/$e deprecia!le amount ofan asset s$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$e BI,+o speci c re(uirementregarding componentdepreciation'
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IAS . - Propert 1 Plantand E(uipmentAccounting Taxation
PPE ma !e accountedfor using t$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$e
lessee are deemedadditional lease income'
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IAS .C- @easesAccounting Taxationperating @ease- @essee
,ental e&pense isrecogni%ed on a straig$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$elessee are deemedadditional leasee&pense'
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IAS .C- @easesAccounting Taxation"inance lease-
,ental pa ments aretreated as installmentpa ments for t$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
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IAS 3 - Impairment ofassetsStatement of nancial position accounts
a ected:Propert and e(uipmentInvestment propertIntangi!le assets
Income statement accounts a ected
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
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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'
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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$are in investeeFs #I
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IAS 24- Investment inAssociatesAccounting Taxation
Investment in associatess$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$are in net income isnot recogni%ed'
9ividends from domesticcorporation are notta&a!le
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I",I# .5- ,evenue of ,ealEstate 9eveloperAccounting Taxation
,evenue is recogni%edeit$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
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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
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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'
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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&'
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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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