Depth Analysis, Accounting Estimate Change, Error Correction, Fiscal Treatment

If accounting information is not considered or is not used correctly when making financial statements, reliable accounting information can be reasonably predicted. This accounting estimate is wrong. It belongs to the previous error and needs to follow the accounting correction method of error correction.

On the contrary, if the accounting estimate at that time was based on the reliable facts that existed and could be obtained at that time, then the change of accounting estimate was due to the changes in the current state of assets and liabilities and the expected future economic interests and obligations. That would be the accounting estimate change and the accounting method of accounting change.

This article focuses on the analysis of accounting estimates change and accounting error correction, accounting and income tax treatment.

Accounting treatment

Accounting treatment of changes in accounting estimates

Accounting treatment change is different from accounting policy change.

The accounting treatment of accounting policy changes requires that the accounting policy changes provide more reliable and more relevant accounting information. The method of retrospective adjustment should be adopted. If it is not feasible to determine the impact of accounting policy changes on the number of pre reported impact, it should start applying the changed accounting policy at the beginning of the earliest period of the traceable adjustment.

At the beginning of the current period, it is not feasible to determine the cumulative impact of accounting policy changes on the previous periods, and the future applicable law should be adopted.

To deal with changes in accounting estimates, the guidelines require uniform application of future applicable law.

If an enterprise is unable to distinguish a change from an accounting policy change or an accounting estimate change, it should treat it as a change of accounting estimate.

(two) accounting treatment for early correction of errors

The accounting treatment for early correction should be dealt with differently. For unimportant Early mistakes, we should directly adjust the relevant items in the same period as before.

For important early errors, enterprises should use the retrospective restatement method to correct, but it is not feasible to determine the cumulative impact number of previous errors.

The accounting errors in the reporting year that are found between the annual balance sheet date and the financial report approval date and the prior errors that are not important before the reporting year shall be dealt with in accordance with the balance sheet date.

Tax treatment

The twenty-first provision of the enterprise income tax law of the People's Republic of China stipulates: "when calculating taxable income, the financial and accounting treatment methods of enterprises are inconsistent with the provisions of tax laws and administrative regulations, and shall be calculated in accordance with the provisions of tax laws and administrative regulations."

Whether accounting policy changes, accounting estimates change or early accounting errors, as long as there is a discrepancy between the accounting profit and loss of the relevant year and the taxable income of the year, the taxable income must be calculated according to the provisions of the tax law.

Case analysis

Case 1

A company is a listed company, B company and A company were related before January 1, 2012, and no relationship existed after January 1, 2012.

In 2010, B borrowed 40 million yuan from its bank on its own property, and A also issued an open-ended commercial acceptance bill with a face value of 40 million yuan as a pledge.

In 2013, banks were sued for B's inability to repay the principal of 40 million yuan (interest paid).

The court made a first instance judgment in 2013, and the bank first implemented the mortgage property of B company, which was assessed at the end of 2012 for 60 million yuan.

In February 1, 2013, the court of second instance decided that the bank could carry out the mortgage property of B company, and the bank could request the A company to undertake the obligation of paying the pledge on the B bank's outstanding bank loan.

A company communicated with B company, court and bank, and the banks and courts agreed to implement the mortgage property of B company first.

In March 2013, the mortgage property of B was evaluated by the court and prepared for auction. As B did not have the ability to pay, the A company paid the auction margin for the real estate auction to replace B company.

A decided on the balance sheet date of 2012 that, because the value of B's mortgaged property was about 60 million yuan, the A company and the court and creditors could communicate with the court and creditors after the debt repayment was considered that the A company would not lose joint debt.

In April 1, 2013, A announced the annual report for 2012. Taking into account the date from the balance sheet date to the court judgement date and the date of the financial reporting date, the value of B's mortgaged property did not fall sharply (the debt principal was reduced), and the A company disclosed the above liabilities as contingent liabilities (not counting the estimated liabilities).

From April 2013 to July, due to the fact that B company was on the verge of bankruptcy, and so on, the court delayed the auction of B real estate.

In October 2013, the bank asked A to assume joint liability for paying debts, and A was arrested for bank deposits of 40 million yuan.

Question: should A company's 40 million yuan debt loss in 2013 be counted in 2013 or should it be retroactively adjusted to 2012?

Case analysis:

First, judge whether there is accounting error in the financial statements of A company in 2012.

In this case, B company borrowed property as collateral in 2010. In 2012, because of B's inability to repay 40 million yuan of bank debt, the bank filed a lawsuit. The court made a trial in 2012. The bank first implemented the mortgage property of B company, and the value of the property rose to 60 million yuan at the end of 2012, which is 20 million yuan higher than the 40 million yuan of the debt principal.

Therefore, judging from the existence of the balance sheet date, A company may not be required to perform joint and several liability, so the obligations related to this contingency do not meet the conditions for the confirmation of estimated liabilities.

Then, despite the new progress made in the A company's financial report in 2012 (April 1, 2013), that is, in February 1, 2013, the court decided that the bank could carry out the mortgage property of B company, and the bank could request the A company to undertake the cashing obligation of the pledge of the B bank's outstanding bank loan. However, considering that the court and the creditor agreed to implement the B company's debt property first, and the mortgage property was already prepared for the valuation auction, the value of the mortgage property of the B company did not fall sharply (the situation of the debt principal was reduced), so it was reasonable to expect the B company to repay the bank debt through the auction of the house property.

Therefore, A company is still unlikely to perform joint and several liability. Therefore, obligations related to this contingency still do not meet the conditions for recognised liabilities.

Accordingly, it is reasonable for A to disclose the joint and several liability of B company as a contingency in its 2012 annual report.

A made a judgement on the balance sheet date of 2012 on the basis of the evidence that was available at that time, and there was no evidence that there was any mistake in the judgment at that time. Therefore, the matter is not part of the previous error.

In October 2013, due to the delay in the execution of the auction of B's real estate, the A company has withheld 40 million yuan of bank deposits for this purpose, which has changed the debt situation, and the resulting revaluation and adjustment of the debt book value should belong to the accounting estimate change.

According to the regulation, the loss of A company's 40 million yuan in 2013 should be included in the profit and loss of 2013, and there is no need to retroactively adjust the relevant financial data in 2012.

Tax treatment:

Because B company and A company were related before January 1, 2012, according to the forty-fourth regulation of the pre tax deduction of enterprise assets loss income tax (State Administration of Taxation Announcement No. twenty-fifth of 2011, hereinafter referred to as "measures"), it can be judged that A company provides guarantee for B company and related to production and operation.

According to the forty-fourth and forty-fifth provisions of the "measures", A company deducts the creditor's rights loss caused by the B company's guarantee to the affiliated enterprise A in accordance with the principle of independent paction, but the amount allowed is only limited to the amount that A company can not recover after it has been sought after by the company.

Therefore, the auction margin (other receivables) paid by the A company on behalf of the B company and the estimated loss of 40 million yuan in 2013 in the year of the operating expenses are not allowed to be deducted before tax. After the actual loss is confirmed, the specific statement by the A enterprise, and the special report issued by the agency and the related proof materials, can be deducted.

Case 2

A listed the 2012 annual report in early March 2013.

Only a few days after the annual report is published, A has received the "relevant" of the Provincial Department of finance. According to the requirements of the document, A company shall, from May 1, 2011 onwards, collect the basic funds of reservoirs and hydropower stations with generating capacity of 25 thousand kilowatts and more than generating electricity and 8 kilowatts of electricity.

According to the scope of the levy defined in the document, all the A hydropower stations that have been commissioned are required to pay the reservoir area fund.

It is estimated that after implementing the above provisions, the net profit of A company belonging to the parent company in 2011 will be reduced by about 9 million yuan, and the net profit attributable to shareholders of the parent company in 2012 will be reduced by about 18 million yuan.

The document also stipulates that the fund income of large and medium-sized reservoir areas that should be collected from May 1, 2011 to December 31, 2012 shall be recovered by the provincial Power Grid Corp and fully paid into the provincial treasury before April 1, 2013. The fund income of large and medium scale reservoir areas collected after January 1, 2013 will be dealt with in accordance with the relevant regulations of the notice on the collection and use of funds for large and medium scale reservoirs in XX Province (Trial Implementation).

Question: whether the fund of the reservoir area of A in 2011-2012 in 2013 is a major accounting error, does it need to be traced back?

Case analysis:

In this case, the A company received the government documents in 2012 after its annual report, which is not a reliable information that can be reasonably expected and taken into consideration in the preparation of the pre financial statements in the accounting standards. It does not belong to the reliable information that can be obtained when the approval of the prophase financial statements is reported. A company can not obtain or anticipate this matter when preparing the 2010 financial statements, so the matter does not belong to the previous error, and the financial report of the A company does not need to be adjusted in 2011-2012.

According to accounting standards, A company does not need to carry out retrospective adjustment, but it should disclose special information on this matter.

At the same time, the fund should be included in the first quarter of 2013 in 2011 and 2012.

Tax treatment: the ninth provision of the regulations on the implementation of the enterprise income tax law of the People's Republic of China provides: "the calculation of the taxable income of enterprises shall be based on the accrual basis, and shall be the income and expenses of the current period. Whether they are paid or not, they shall be regarded as the income and expenses of the current period, and shall not be the income and expenses of the current period. Even if the payments have been paid in the current period, they shall not be regarded as the income and expenses of the current period.

Unless otherwise stipulated by the regulations and the competent departments of Finance and taxation under the State Council. "

According to the regulation, although the inventory fund payable in 2011 and 2012 will be included in the profit and loss of 2013, the amount of taxable income should be deducted from the original annual tax deduction.

According to the notice of the State Administration of Taxation on the issue of tax treatment on the taxable income of enterprise income tax (the State Administration of Taxation Announcement No. fifteenth 2012), the specific operation methods shall be implemented, that is, if an enterprise finds that the expenses incurred in the previous year, which are actually deducted before the enterprise income tax actually according to the tax provisions, should not be deducted or deducted less, the enterprise shall make a supplementary deduction to the annual calculation of the item after making a special declaration and explanation, but the period for the confirmation of the recovery shall not exceed 5 years.

The enterprise income tax due to the above reasons can be deducted from the taxable amount of enterprise income tax in the year of confirmation. If the tax is not deducted, it can be deducted or applied for tax refund in the next year.

If a loss making enterprise seeks to confirm the expenses that have not been deducted before the enterprise income tax in the previous year, or if a profit enterprise has suffered losses after its confirmation, it should first adjust the amount of the annual loss payable by the expenditure, and then calculate the enterprise income tax payable in the subsequent year according to the principle of making up the deficit, and shall also pay according to the provisions of the preceding paragraph.

Accounting estimates change and error correction are sometimes difficult to distinguish, especially when the accounting estimates change and the error correction due to accounting error is caused.

The key to distinguish between the two is to determine whether there is any mistake in the earlier accounting estimate.

If accounting information is not considered or is not used correctly when making financial statements, reliable accounting information can be reasonably predicted. This accounting estimate is wrong. It belongs to the previous error and needs to follow the accounting correction method of error correction.

On the contrary, if the accounting estimate at that time was based on the reliable facts that existed and could be obtained at that time, then the change of accounting estimate was due to the changes in the current state of assets and liabilities and the expected future economic interests and obligations. That would be the accounting estimate change and the accounting method of accounting change.

This article focuses on the analysis of accounting estimates change and accounting error correction, accounting and income tax treatment.

Accounting treatment

Accounting treatment of changes in accounting estimates

Accounting treatment change is different from accounting policy change.

The accounting treatment of accounting policy changes requires that the accounting policy changes provide more reliable and more relevant accounting information. The method of retrospective adjustment should be adopted. If it is not feasible to determine the impact of accounting policy changes on the number of pre reported impact, it should start applying the changed accounting policy at the beginning of the earliest period of the traceable adjustment.

At the beginning of the current period, it is not feasible to determine the cumulative impact of accounting policy changes on the previous periods, and the future applicable law should be adopted.

To deal with changes in accounting estimates, the guidelines require uniform application of future applicable law.

If an enterprise is unable to distinguish a change from an accounting policy change or an accounting estimate change, it should treat it as a change of accounting estimate.

(two) accounting treatment for early correction of errors

The accounting treatment for early correction should be dealt with differently. For unimportant Early mistakes, we should directly adjust the relevant items in the same period as before.

For important early errors, enterprises should use the retrospective restatement method to correct, but it is not feasible to determine the cumulative impact number of previous errors.

The accounting errors in the reporting year that are found between the annual balance sheet date and the financial report approval date and the prior errors that are not important before the reporting year shall be dealt with in accordance with the balance sheet date.

The twenty-first provision of the enterprise income tax law of the People's Republic of China stipulates: "when calculating taxable income, the financial and accounting treatment methods of enterprises are inconsistent with the provisions of tax laws and administrative regulations, and shall be calculated in accordance with the provisions of tax laws and administrative regulations."

Whether accounting policy changes, accounting estimates change or early accounting errors, as long as there is a discrepancy between the accounting profit and loss of the relevant year and the taxable income of the year, the taxable income must be calculated according to the provisions of the tax law.

Case 3

A company is a listed company.

In 2008, A confirmed its corresponding estimated liabilities due to the guarantee of bank loans to B company which had business with them. It was included in the outlay of the year.

The guarantee is related to A's taxable income.

In 2010, the guaranty liability was actually fulfilled. A company applied to the competent tax authorities for 300 million yuan to guarantee the pre tax deduction during the 2010 corporate income tax settlement.

If the loss is not considered, A company's taxable income amount to 100 million yuan in 2010 and the income tax expense is 25 million yuan.

The company believes that the above guarantee loss is in line with the pre tax deduction conditions, but whether it can be deducted is ultimately determined by the tax authority, and there is uncertainty in the determination of the tax authorities.

When A company disclosed the annual report of 2010, it has not obtained the approval document of the tax authorities in charge of the guarantee loss. Therefore, in the 2010 annual report, the income tax liability of 25 million yuan was confirmed, and the equivalent amount of the current income tax cost was confirmed.

At the same time, as of the deadline for the payment of income tax on 2010, A company has not actually paid the 2010 income tax due to the failure to obtain the documents issued by the competent tax authorities.

In September 2011, A was approved by the competent tax authorities: the total amount of guarantee loss for the B company's Bank loan is 300 million yuan, which can be deducted from the taxable income amount, that is, the taxable income amount in 2010 is -2 billion yuan, and the loss in 2010 can be compensated by the taxable income realized from 2011 to 2015.

Question: A company obtained the approval of the competent tax authority in 2011. It can deduct 300 million yuan from the taxable income in 2010, resulting in 2010 of the enterprise income tax payable to zero. The 25 million yuan income tax expense should be traced back to 2010 or the 2011 year?

Case analysis:

In this case, A company has performed the bank loan guarantee responsibility for B company since 2008, and has fulfilled the 300 million yuan loan guarantee loss until 2010.

When A company disclosed its 2010 annual report, it has not yet obtained the approval document of the tax authorities' permission to guarantee losses before tax deduction.

The approved document issued by the A company in September 2011 is not a reliable information that can reasonably be expected to be obtained and should be considered when compiling the annual financial report of A company in 2010. Nor does it belong to the "reliable information that can be obtained" when the financial report is approved in 2010.

Therefore, the adjustment of the corresponding income tax expenses and the income tax paid by the A company after obtaining the approval of the competent tax authorities in September 2011 is not a previous error, but should be judged as an accounting estimate change. Therefore, the future applicable law should be adopted according to the standards.

In this case, the relevant accounting and tax treatments are as follows:

2008:

Borrowing: non operating expenses - guarantee loss 3

Loan: estimated liability - guarantee loss 3

Tax treatment: the estimated liabilities of A company are not allowed to be deducted before tax, and the taxable income is increased by 300 million yuan.

Since A can not determine whether the loss can be deducted in the future, the deferred income tax assets are not recognized.

2010:

Borrow: estimated liability - guarantee loss 3

Credit: 300 million yuan for bank deposits

Borrowing: income tax expense - current income tax expense 0.25

Loan: tax payable - income tax payable 0.25

Tax treatment: in September 2011, it received the approval of the tax authorities, readjusted the 2010 year enterprise income tax returns, reduced the taxable income amount to 300 million yuan, and the income after tax adjustment in 2010 was -2 billion yuan, the amount of taxable income was zero, and the amount of income tax payable was zero.

Accounting treatment: the income tax expense mentioned in 2010 shall not be adjusted retrospectively, and the profit and loss of 2011 should be adjusted directly.

Borrowing: tax payable - income tax payable 0.25

Loan: income tax expense - current income tax expense 0.25

A loss of 200 million yuan in 2010 is expected to be made up in the next five years. The deferred income tax assets should be recognized as 50 million yuan and processed according to the future applicable law.

Borrower: deferred income tax assets 0.5

Loan: income tax expense deferred income tax expense 0.5

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