Schedule 17A of the Taxes Consolidation Act 1997 (TCA) provides transitional rules to apply where a company’s taxable profits begin to be calculated using international accounting standards (IFRS), equivalent Irish GAAP (Generally Accepted Accounting Practice) standards, or for accounting periods beginning on or after 1st January 2015 ‘new’ Irish GAAP standards to the extent that they embody IFRS.
The transitional arrangements apply to each new standard as regards matters covered by the standard. Thus, the rules will be applicable to more than one accounting period where a company’s accounts reflect a gradual move to such standards, as may be the case as Irish GAAP gradually converges with IFRS. The purpose of the rules is, in the case of revenue recognition and gains and losses on financial assets and financial liabilities, to ensure that, on the move to IFRS/new Irish GAAP, no amounts are double counted for tax purposes and that no amounts fall out of the charge to tax. The Schedule also contains rules for bad debts and bad debts provisions to ensure that, where a debt is written off against a provision that has not been deducted for tax purposes, the write-off of the debt will be deductible for tax purposes.
Further comprehensive guidance on the application of the Schedule 17A can be found in the current version of Notes for Guidance on the Taxes Consolidation Act 1997.
2. Finance Act 2014 Amendment to the definition of ‘relevant accounting standards’
Schedule 17A was originally introduced in Finance Act 2005 to provide for transitional arrangements where a company moves from preparing financial statements using one accounting framework to another, namely, on the move from Irish GAAP to international accounting standards or to Irish GAAP based on international accounting standards and which produced substantially the same results as international accounting standards. The Schedule allows the tax amounts to be determined at the point of moving to the new framework and adjustments to be spread over a 5 year period.
Finance Act 2014 amended the definition of ‘relevant accounting standards’ in Schedule 17A. The Schedule accommodates recent accounting standards issued by the Financial Reporting Council - FRS (Financial Reporting Standard) 101, FRS102, FRS 103 - which became mandatory for the majority of Irish companies from 1 January 2015. The updated definition extends the transitional arrangements, to companies who change their accounting standards to comply with updated standards and ensures that elements of FRS102 and 103, along with any future published standards to the extent that they embody international accounting standards, will be covered by the Schedule. FRS 101 is already covered by clause (b) of paragraph 1. While substantial elements of FRS 102 continue to reflect old Irish GAAP, and will not give rise to transitional adjustments, FRS 102 does contain elements that embody international accounting standards and to that extent will give rise to adjustments under schedule 17A.
If an entity has adopted new Irish GAAP standard FRS 102 or FRS 103, prior to 1 January 2015, the transitional rules contained in the Schedule will be applied administratively, as appropriate, to these early adopters.
The Revenue Commissioners