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Tuesday, March 28, 2006
Tax notes: Taxes on changes in accounting methods
Adoption of the new accounting standards, which became effective in 2005, may require changes in the method of accounting or adjustments in accounting estimates for financial reporting purposes.
If these changes in policies involve changes in the timing of recognition of income and expenses, which the taxpayer would also like to adopt for tax reporting purposes, the Bureau of Internal Revenue’s (BIR) approval should first be secured before the taxpayer can do so.
A change in the method of accounting employed in keeping books means any change in the accounting treatment of items of income or deductions, a change involving the basis of valuation employed in teh computation of inventories or a change involving the adoption of, or a change in the use of, any other specialized basis of computing net income.
In case the company would like to adopt the new accounting method or estimate for tax purposes beginning 2006, it should file the request on or before Mar. 31. Such request is filed with the National Office of the BIR and the approval is issued in the form of a tax rulling. (Source: Punongbayan & Araullo)
For Bisaya stories from Cebu. Click here. (March 28, 2006 issue)
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