Professional Documents
Culture Documents
Standards
Reconciliation of Difference
PAS
Inventories
PAS
PAS 10
PAS 16
PAS 17
Leases
PAS 19
Employee Benefits
PAS 21
PAS 24
PAS 27
PAS 29
Investment in Associates
PAS 32
PAS 33
PAS 36
Impairment of Assets
PAS 38
Intangible Assets
PAS 39
PAS 40
Investment Properties
PFRS 2
Share-based Payments
PFRS 3
Business Combinations
PFRS 5
After 2005
Additional standards and interpretations issued by the
IASB and the IFRIC
37 standards (8 x PFRSs; 29 x PASs)
24 interpretations (13 x IFRICs; 11 x SICs)
Understanding Differences
ACCOUNTING
TAX
Fair value
Cost
Substance
Form
Matching Income
and Expenses
Accounting Standards
Legal Provisions
PAS 2 : Inventories
PAS 2 : Inventories
Accounting
Tax
Tax
For tax, property shall be valued at cost.
Excludes:
Abnormal waste
Storage Cost
Unrelated
administrative
overhead
Selling costs
Deferred Payment
cost
Foreign exchange
differences
90
10
Accounts Payable
Interest Expense
Cash
Deferred Interest Expense
100
10
100
100
10
PAS 2 : Inventories
Accounting
Tax
PAS 2 : Inventories
Accounting
If not availed, the
foregone discount is
recognized as finance
cost.
Tax
Such finance cost shall not be
deductible.
Useful to use a different account title to
record
discounts recognized upon
purchase but not yet granted under a
different account title
finance costs relating to unavailed
discounts.
Goods
Transfer of risks
& rewards
Management
involvement
Substance of the
transaction
Recognize revenue
when:
1. Measured reliably
2. Flow of economic
benefits probable
3. Costs measured
reliably
Services
Performance of
obligations
Percentage of
completion method
PAS 11
construction
contracts
Tax
Revenues shall be
accounted for separately.
Tax
Recognized as sale of services
Income tax :
Connection fee of P50 is
recognized as revenue in the first
year. Airtime revenue of P360 is
recognized over the 12 month
contract period.
VAT:
Taxable sales is the amount
actually received during the year.
PAS 17 : Leases
Classification of Leases
1. Finance Lease is a lease that transfers
substantially all the risks and rewards incident to
ownership of an asset. Title may or may not
eventually be transferred.
2. Operating Lease is a lease other than the finance
lease.
PAS 17 : Leases
Accounting
Tax
Operating Lease
Operating Lease
Finance Lease
Operating Lease
Finance Lease
Conditional Sale
Equity Instrument
The substance of a
financial instrument
governs its classification
rather than its legal form
Tax
Instrument
Common shares
Redeemable preferred
shares with 50% fixed
dividend each year
subject to availability of
distributable profits
Convertible bond which
converts into fixed
number of shares
Classification
For
Accounting
Equity
Liability
Liability for
bond and
equity for
option
Liability
Treatment
For Tax
Payout
Equity
Dividends
Equity
Accounting:
Interest
Tax: Dividends
Liability
Accounting:
Interest and
Dividend
Tax: Interest
Liability until
converted to
shares
Interest
Dividend
Deductibility
Deductible
Non-deductible
Withholding Tax
Interest paid to
foreign creditor is
subject to 20%
FT or tax treaty
rate, if applicable
-0% if intercorporate
-32% if NRFC
unless Treaty rate
- 15% if Resident if
tax-sparing
provision applies
100
Cash
Deferred Interest income
Accounts Receivable
Interest Income
100
10
90
10
100
10
Tax
Taxpayer should report as sales
the full invoice amount, both for
income and VAT purposes.
Implicit interest income on
transaction is not taxable.
For tracking purposes, a different
account may be used to record this
type of interest.
Tax
Not qualified as part of the cost of
PPE.
This difference affects:
- Depreciation
- Book value of PPE when disposed
cost of restoration
incurred to install an item.
Tax
Withholding tax - based on actual
acquisition cost of PPE.
VAT - purchase should be reported at
acquisition cost.
Tax
Acquisition cost:
Purchase price
Installation cost
PV Est. dismantling cost
Total Acquisition Cost
P 1,500,000
100,000
250,000
P 1,850,000
P 1,500,000
100,000
P 1,600,000
Annual Depreciation
370,000
320,000
Lessees Books
Year 1
Dr. Cash
P1,000
Dr. Receivable
150
Cr. Payable
1,150
Cr. Cash
150
P1,000
Year 2
Dr. Cash
P1,000
Dr. Receivable
Cr. Rent Income
150
Cr. Payable
1,150
Cr. Cash
150
P1,000
Tax
Tax return in affected year should be
amended to report true income or
expense.
However, this can only be done within
three years from the date of filing of
such return and provided no notice for
audit or investigation has been served to
the taxpayer.
- Sec. 6, NIRC, as amended
Tax
If incurred in connection with the
acquisition of property used in business,
taxpayer is given the option to either :
Treat interest as part of the cost of
the property (and thereof be part of
the depreciable base) or
Claim interest as deduction in the
year incurred.
- Sec. 34(B)(1), NIRC as amended
Tax
Gain or loss is recognized only when the asset is
sold or disposed.
- Sec. 96, Rev. Regs. 2
Non-deductible losses. Gains from reversal of
impairment loss are not taxable.
- BIR Ruling DA-403-03,
Nov. 10, 2003
Tax
Expenditure on research
Option to
P 150,000
(P 28,872)
P 121,128
P 12,113
Deductible depreciation
P 15,000
Tax
Only contributions paid during the year to
a BIR-qualified trusteed plan are
deductible
Rule on deductibility:
Contributions for present service
cost full deductible;
Contributions for past service cost,
1/10th of the contribution paid.
- Sec 34(J), NIRC
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