Schedule 17A Accounting standards
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Amendments
Schedule 17A inserted by Finance Act 2005 section 48(1)(g) as respects any period of accounts beginning on or after 1 January 2005.
Interpretation
1 In this Schedule "relevant accounting standards" means-
(a) international accounting standards, or
(b) as regards the matters covered by those published standards, Irish generally accepted accounting practice which is based on published standards-
(i) which are stated so as to embody, in whole or in part, international accounting standards, and
(ii) the application of which would produce results which are substantially the same as results produced by the application of international accounting standards.
What are "relevant accounting standards"?
(1) This Schedule sets out transitional arrangements to deal with double-counting and non-counting of profits for tax purposes where a company changes the basis on which its accounts are prepared from generally accepted accounting practice (GAAP) to ...
Transitional measures (amounts receivable and deductible)
2 (1) In this paragraph-
"deductible amount", in relation to a company, means the aggregate of the amounts of-
(a) so much of any amounts receivable by the company which falls to be taken into account as a trading receipt in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period computed in accordance with relevant accounting standards as was also taken into account as a trading receipt in computing such profits or gains of the company for any accounting period ending before the first accounting period in respect of which such profits or gains of the company were so computed, and
(b) so much of an expense incurred by the company, being an expense which would have been deductible in computing profits or gains for the purposes of Case I or II of Schedule D of the company if the expense had been incurred in an accounting period for which such profits or gains were computed in accordance with relevant accounting standards, as-
(i) was not deducted in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period ending before the first accounting period in respect of which such profits or gains of the company are computed in accordance with relevant accounting standards, and
(ii) is not deductible in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for any accounting period for which such profits or gains of the company are so computed;
"taxable amount", in relation to a company, means the aggregate of the amounts of-
(a) so much of an amount receivable by the company, being an amount receivable which would have been taken into account as a trading receipt in computing the profits or gains for the purposes of Case I or II of Schedule D of the company if the amount had accrued in an accounting period for which such profits or gains were computed in accordance with relevant accounting standards, as is not so taken into account-
(i) for an accounting period for which such profits or gains of the company are computed in accordance with relevant accounting standards, or
(ii) for an accounting period ending before the first accounting period in respect of which such profits or gains are so computed,
(b) so much of an expense incurred by the company which is deductible in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period for which such profits or gains of the company are computed in accordance with relevant accounting standards as was deducted in computing such profits or gains of the company for any accounting period ending before the first accounting period of the company in respect of which such profits or gains were so computed.
What is a deductible amount and what is a taxable amount in relation to IFRS and Irish GAAP?
(2.1) A figure for non-counting of profits and non-counting of expenses is calculated, and this amount is referred to as a deductible amount. A figure for non-counting of profits and double-counting of expenses is also calculated, and this amount is ...
(2)(a) An amount equal to the excess of the taxable amount in relation to a company over the deductible amount in relation to the company shall, subject to subparagraph (4), be treated as a trading receipt of the company for the first account ing period of the company in respect of which profits or gains for the purposes of Case I or II of Schedule D of the company are computed in accordance with relevant accounting standards.
[(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the "relevant amount") which is treated under clause (a) as a trading receipt for an accounting period (in this clause referred to as the "relevant accounting period") shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.
(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.]1
Amendments
1 Paras (b) and (c) substituted by Finance Act 2006 section 61(1)(d)(i)(I) as respects any period of account beginning on or after 1 January 2005.
How is any excess of a taxable amount over the deductible amount treated where a company changes the basis on which its accounts are prepared from GAAP to IFRS?
(2.2) If the taxable amount exceeds the deductible amount, the excess is treated as a trading receipt, arising in five equal instalments, the first instalment of which arises in the first IFRS accounts period. The amount is to be charged in accountin...
(3)(a) An amount equal to the excess of the deductible amount in relation to a company over the taxable amount in relation to the company shall, subject to subparagraph (4), be treated as a deductible trading expense of the trade carried on by the company for the first accounting period of the company in respect of which profits or gains for the purposes of Case I or II of Schedule D of the company are computed in accordance with relevant accounting standards.
[(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the "relevant amount") which is treated under clause (a) as a deductible trading expense for an accounting period (in this clause referred to as the "relevant accounting period") shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.
(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.]1
Amendments
1 Paras (b) and (c) substituted by Finance Act 2006 section 60(1)(d)(i)(II) as respects any period of account beginning on or after 1 January 2005.
How is any excess of the deductible amount over the taxable amount treated where a company changes the basis on which its accounts are prepared from GAAP to IFRS?
(2.3) If the deductible amount exceeds the taxable amount, the excess is treated as a deductible trading expense arising in five equal instalments, the first instalment of which arises in the first IFRS accounts period. The amount is to be treated as...
(4) This paragraph does not apply as respects any amount taken into account under [paragraph 3 or 4]1.
Amendments
1 Substituted by Finance Act 2006 section 61(1)(d)(i)(III) as respects any period of account beginning on or after 1 January 2005.
Transitional arrangements (bad debts)
3 (1) In this paragraph-
"current bad debts provision", in relation to period of account of a company, means so much of the aggregate value of debts at the end of the period of account as represents the extent to which they are estimated to be impaired in accordance with relevant accounting standards;
"first relevant period of account", in relation to a company, means the first period of account in respect of which the company prepares its accounts in accordance with relevant accounting standards;
"opening bad debts provision", in relation to company, means so much of the aggregate value of debts at the beginning of the first relevant period of account of the company as represents the extent to which they are estimated to be impaired in accordance with those standards;
"specific bad debts provision", in relation to company, means the aggregate of the amounts of doubtful debts which were respectively estimated to be bad at the end of the period of account immediately preceding the first relevant period of account of the company.
How is any increase or decrease in the general provision for bad debts treated for tax purposes?
(3.1) It is normal accounting practice in the case of a trading company which extends credit to provide for doubtful debts. The provision typically has two parts: a general provision (for example, 2% of the value of outstanding debt) and included wit...
(2) This paragraph applies as respects a period of account in respect of which a company prepares its accounts in accordance with relevant accounting standards.
(3) Where, as respects any period of account for which a company prepares its accounts in accordance with relevant accounting standards, the amount of the opening bad debts provision exceeds the higher of-
(a) the current bad debts provision, or
(b) the specific bad debts provision, the excess, reduced by any amount treated under this section as a trading expense for any earlier period of account or, if there is more than one such amount, by the aggregate of such amounts, shall be treated as a trading expense of the company's trade for the period of account.
How is the excess of the level of general bad debts provision at the start of the first IFRS period over its specific bad debt provision treated for tax purposes?
(3.3) In a case where the level of its general provision for bad debts at the start of its first IFRS period (opening bad debts provision) exceeds its current bad debts provision (or specific bad debts provisions, if higher), the excess is allowed as...
(4) A debt shall not be taken into account for the purposes of paragraph 4 if it may be taken into account for the purposes of this paragraph.
Amendments
Subpara (4) inserted by Finance Act 2006 section 61(1)(d)(ii) as respects any period of account beginning on or after 1 January 2005.
Transitional measures (gains and losses in financial instruments)
4 (1) In this paragraph-
"changeover day", in relation to a company, means the last day of the accounting period immediately preceding the first accounting period of the company in respect of which profits or gains for the purposes of Case I or II of Schedule D of the company are computed in accordance with relevant accounting standards which are, or include, relevant accounting standards in relation to profits or gains or losses on financial assets and financial liabilities;
"deductible amount", in relation to a company, means the aggregate of-
(a) so much of any amount of loss accruing on or before the changeover day on a financial asset or financial liability of the company, being a loss which had not been realised on or before that day and which would have been taken into account in computing profits or gains for the purposes of Case I or II of Schedule D of the company if it had accrued in an accounting period commencing after the changeover day, as, apart from this paragraph, would not be so taken into account for any accounting period of the company, and
(b) so much of any amount of profits or gains, accruing and not realised in a period or periods (in this clause referred to as the 'first-mentioned period or periods') ending on or before the changeover day on a financial asset or financial liability of the company, which falls to be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period or periods commencing before the changeover day as would, apart from this paragraph, be taken into account twice in computing profits or gains for the purposes of Case I or II of Schedule D of the company, by virtue of a profit, gain or loss, accruing in a period which includes the first-mentioned period or periods, being taken into account in computing profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period commencing after the changeover day;
"taxable amount", in relation to a company, means the aggregate of-
(a) so much of any amount of profits or gains accruing on or before the changeover day on a financial asset or financial liability of the company, being profits or gains which had not been realised on or before that day and which would have been taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company if they had accrued in an accounting period commencing after the changeover day, as apart from this paragraph, would not be so taken into account for any accounting period of the company, and
(b) so much of any amount of loss, accruing and not realised in a period or periods (in this clause referred to as the first-mentioned period or periods) ending on or before the changeover day on a financial asset or financial liability of the company, which falls to be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period or periods commencing before the changeover day as would, apart from this paragraph, be taken into account twice in computing profits or gains for the purposes of Case I or II of Schedule D of the company, by virtue of a profit, gain or loss, accruing in a period which includes the first mentioned period or periods, being taken into account in computing profits or gains for the purposes of Case I or II of Schedule D of the company for an accounting period commencing after the changeover day.
What effect is there likely to be as regards unrealised gains and losses where a company changes the basis on which it presents accounts to the IFRS rules?
(4.1) This paragraph deals with gains and losses on financial instruments, i.e, financial assets and liabilities. Under IFRS rules, an increase value of such an asset is treated as a gain, and a decrease is treated as a loss, even though such gains a...
(2)(a) An amount equal to the excess of the taxable amount in relation to a company over the deductible amount in relation to the company shall be treated as a trading receipt of the company for the first accounting period of the company commencing after the changeover day.
[(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the "relevant amount") which is treated under clause (a) as a trading receipt for an accounting period (in this clause referred to as the "relevant accounting period") shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.
(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for].1
Amendments
1 Paras (b) and (c) substituted by Finance Act 2006 section 61(1)(d)(iii)(I) as respects any period of account beginning on or after 1 January 2005.
If the taxable amount exceeds the deductible amount, in what way is the excess treated in the corporation tax computation?
(4.2) If the taxable amount exceeds the deductible amount, the excess is treated as a trading receipt arising in five equal instalments, the first instalment of which arises in the first IFRS accounts period. The amount is to be charged in accounting...
(3)(a) An amount equal to the excess of the deductible amount in relation to a company over the taxable amount in relation to the company shall be treated as a deductible trading expense of the trade carried on by the company for the first accounting period of the company commencing after the changeover day.
[(b) Notwithstanding clause (a), an amount (in this subparagraph referred to as the "relevant amount") which is treated under clause (a) as a deductible trading expense for an accounting period (in this clause referred to as the "relevant accounting period") shall not be taken into account in computing the profits or gains for the purposes of Case I or II of Schedule D of the company for that accounting period, but instead, subject to clause (c), a part of the relevant amount shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period. The part of the relevant amount to be so taken into account for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years.
(c) Where any accounting period referred to in clause (b) is the last accounting period in which a company carried on a trade or profession, then such part of the relevant amount shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.]1
Amendments
1 Paras (b) and (c) substituted by Finance Act 2006 section 61(1)(d)(iii)(II) and shall be deemed to have applied as respects any period of account beginning on or after 1 January 2005.
If the deductible amount exceeds the taxable amount, in what way is the excess treated in the corporation tax computation?
(4.3) If the deductible amount exceeds the taxable amount, the excess is treated as a deductible trading expense arising in five equal instalments, the first instalment of which arises in the first IFRS accounts period. The amount is to be treated as...
(4)(a) Subparagraph (5) applies to a loss incurred by a company on the disposal at any relevant time of any
financial asset or financial liability where, within a period beginning 4 weeks before and ending 4 weeks after that disposal, the company acquired a financial asset or financial liability of the same class providing substantially the same access to economic benefits and exposure to risk as would have been provided by the reacquisition of the asset or liability disposed of.
(b) In this paragraph "relevant time" means a time after 1 January 2005 which is in a period of 6 months ending on the changeover day.
What anti-avoidance measures are in place in order to prevent the "crystallisation" of actual losses before the move to IFRS?
(4.4) This anti-avoidance provision is designed to stop companies trying to circumvent the "five-year spreading" rule in (2) and (3). In the absence of such a provision, a company would have an incentive to avoid the five year rule by "crystallising"...
(5) A loss to which this subparagraph applies (in this subparagraph referred to as the "relevant loss"), which would otherwise be taken into account in computing profits or gains or losses of a company for the purposes of Case I or II of Schedule D for an accounting period (in this subparagraph referred to as the "relevant accounting period"), shall not be so taken into account but instead-
(a)(i) a part of the relevant loss shall be so taken into account for each accounting period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant accounting period, and
(ii) the part of the relevant loss to be so taken into account for any such accounting period to which this clause applies shall be such amount as bears to the relevant loss the same proportion as the length of the accounting period, or the part of the accounting period falling into the period of 5 years, bears to 5 years,
and
(b) notwithstanding clause (a), where any accounting period referred to in that clause is the last accounting period in which a company carried on a trade or profession, then such part, of the amount referred to in that clause, shall be taken into account for that accounting period as is required to ensure that the whole of that amount is accounted for.
Amendments
Subpara (5) substituted by Finance Act 2006 section 61(1)(d)(iii)(III) as respects any period of account beginning on or after 1 January 2005.
How is the loss under (4.4) treated?
(4.5) The loss arising under (4) is treated as arising in five equal instalments, the first instalments of which arises in the first IFRS accounts period. The loss is to be allowed in accounting periods falling wholly or partly within the five year p...
(6) ...
Amendments
Subpara 4.6 deleted by Finance Act 2008 section 47(1)(b) with effect for any period of account beginning on or after 1 January 2005.
