Pfrs vs Tax
ACPACI PFRS vs. Tax – Significant Differences*
*connectedthinking
Agenda
Introduction Summary of key differences Questions and answer
Introduction
Introduction
About the contents of this material: IFRS keeps on evolving and changes are expected in the future. The contents of this presentation are just some of the more common differences as of December 31, 2006. It is not possible to include all differences for the purpose of this presentation due to time constraints.
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 4 17 July 2006
Key differences
Key changes
PFRS 3
Goodwill
PFRS provisions
Goodwill required to be reviewed for impairment annually. If impaired, a charge to profit and loss for impairment loss is required Negative goodwill will have to be credited to profit and loss.
Tax Provisions
Impairment of goodwill •Not deductible •Deduction may be claimed upon disposal of related assets acquired Negative goodwill credited to P&L: Not taxable .
. Negative goodwill
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 6 17 July 2006
Key Changes
PAS 2
Inventory valuation
PFRS provisions
Inventory needs to be carried at lower of cost of net realizable value (selling price less cost to sell/completion). If the NRV is lower than cost, the difference is charge to impairment loss.
Tax provision
Impairment loss deductible for tax purposes? Provisions to adjust inventories at NRV is not yet deductible (should be realized) The bases of valuation most commonly used by business concerns and which meet the requirements of the Income Tax Law are (Revenue Regulation 2) : (a) cost price or (b) net realizable value, whichever is lower.
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 7 17 July 2006
Key Changes
PAS 2
Inventory valuation
PFRS provisions
Tax
*connectedthinking
Agenda
Introduction Summary of key differences Questions and answer
Introduction
Introduction
About the contents of this material: IFRS keeps on evolving and changes are expected in the future. The contents of this presentation are just some of the more common differences as of December 31, 2006. It is not possible to include all differences for the purpose of this presentation due to time constraints.
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 4 17 July 2006
Key differences
Key changes
PFRS 3
Goodwill
PFRS provisions
Goodwill required to be reviewed for impairment annually. If impaired, a charge to profit and loss for impairment loss is required Negative goodwill will have to be credited to profit and loss.
Tax Provisions
Impairment of goodwill •Not deductible •Deduction may be claimed upon disposal of related assets acquired Negative goodwill credited to P&L: Not taxable .
. Negative goodwill
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 6 17 July 2006
Key Changes
PAS 2
Inventory valuation
PFRS provisions
Inventory needs to be carried at lower of cost of net realizable value (selling price less cost to sell/completion). If the NRV is lower than cost, the difference is charge to impairment loss.
Tax provision
Impairment loss deductible for tax purposes? Provisions to adjust inventories at NRV is not yet deductible (should be realized) The bases of valuation most commonly used by business concerns and which meet the requirements of the Income Tax Law are (Revenue Regulation 2) : (a) cost price or (b) net realizable value, whichever is lower.
PICPA: Tax Implications of New Accounting Standards Isla Lipana & Co./PricewaterhouseCoopers
Page 7 17 July 2006
Key Changes
PAS 2
Inventory valuation
PFRS provisions
Tax