This TD, released on Wed 23.10.2013, says that a consolidated special purpose financial report of a head company of a tax consolidated group cannot satisfy clause 1.1 of Sch 2 to the Income Tax Assessment Regulations 1997 where transactions within the same category are translated using inconsistent methodologies.
Clause 1.1 of Sch 2 to the Regulations allows an entity to translate amounts using the exchange rate in its financial report provided the financial report meets certain requirements. The ATO says the purpose of the Regulations that modify the table in subs 960-50(6) of the ITAA 1997 is to reduce taxpayers’ compliance costs by allowing amounts in a foreign currency to be translated into Australian currency using rates of exchange other than those otherwise prescribed in the income tax law. The financial report must be one that “complies with the accounting standards” as required by subpara 1.1(a)(i) of Clause1.1.
The TD says that where the head company of a tax consolidated group prepares a consolidated special purpose financial statement having regard to the transactions of its subsidiaries, and adopts different translation methodologies for the same category of transactions, then that financial report will not satisfy the requirements of AASB 108, and for this reason, the ATO says it cannot be said to comply with the accounting standards, for the purposes of subpara 1.1(a)(i).
The TD was previously released in draft form as Draft TD 2012/D12.
[LTN 205, 23/10/13]