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COMPUTATION OF BOOK PROFIT FOR INDIAN ACCOUNTING STANDARD COMPLIANT COMPANIES

Accounting - Auditing - By: - ARUN KUMAR V K - Dated:- 7-5-2016 - Central Board of Direct Taxes (CBDT) constituted MAT- Ind AS Committee to suggest framework for computation of book profit for purposes of levy of Minimum Alternate Tax (MAT) under Section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies in the year of adoption and thereafter. The following are brief extracts based on the discussions of the Committee on provisions of Section 115JB, Ind .....

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ts for determining book profit, mainly for: items relating to income-tax; appropriation of profit adjustment for brought forward loss/unabsorbed depreciation; revaluation of assets; distribution of dividend, etc. Adjustment for brought forward loss/unabsorbed depreciation is provided on the basis of provisions contained in Section 205 of Companies Act, 1956 which provides for determining amount available for distribution of dividend. The adjustments indicate that provisions of Section 115JB seek .....

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account and statement of change in equity. Ind AS compliant company shall be required to divide its P & L account into following 02 parts:- Net P & L for the year; Net other comprehensive income, which includes both items to be reclassified to P & L and items not to be reclassified to P & L in subsequent periods. Provisions under Section 123 of the Companies Act, 2013 - Dividend is to be declared out of profits of the company for current year or out of profits of earlier year. In .....

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et or the liability at fair value. Section 123 read with Section 2(43) prohibits distribution of dividend out of reserves containing notional/unrealized gains. View of Committee - Fair value accounting is predominant in Ind AS and therefore net profit and net other comprehensive income of current year may include sizeable amount of notional/unrealised gains or losses. It appears that dividend is allowed to be paid out of profits of current year without any adjustments in respect of notional/unre .....

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unrealized gains included in net other comprehensive income are to be excluded for purposes of arriving at distributable profits for payment of dividend as well as for calculation of profit for managerial remuneration. MCA listed the following items - Changes in revaluation surplus (Ind AS 16 and Ind AS 38); Remeasurements of defined benefit plans (lnd AS 19); Gain and losses arising from translating the financial statements of a foreign operation (lnd AS 21); Gains and losses from investments i .....

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able to changes in the liability's credit risk (Ind AS 109); Changes in value of time value of options when separating intrinsic value and time value of an option contract and designating as hedging instrument only changes in intrinsic value (Chapter 6 of lnd AS 109); Changes in value of forward elements of forward contracts when separating forward element and spot element of a forward contract and designating as hedging instrument only changes in spot element, and changes in value of foreig .....

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