CIRD12300 - Core computational rules: accounting: change of accounting policy

FA02/SCH29 Part13A

Where there is a change of accounting policy in drawing up a company's accounts from one period of account to the next, and both those accounts are drawn up in accordance with GAAP in relation to those periods then the provisions of Part13A will apply.

No taxable credit or allowable debit is to be brought into account under Part13A to the extent that it is brought into account by FA02/SCH29/PARA12, 15 or 17.

Change in accounting value

When there is a change of accounting policy it is possible that there will be a difference between the accounting values recognised at the end of the earlier period and at the beginning of the later period for certain intangible fixed assets. An example of this would be where, on the first adoption of IAS (see CIRD30020), International Accounting Standard IFRS1 causes an intangible fixed asset that had previously been systematically amortised to be recognised at cost.

Where such a difference arises FA02/SCH29/PARA116B treats an increase as a taxable credit, and a decrease as an allowable debit, arising at the start of the later accounting period.

The amount of the debit or credit is the difference multiplied by the fraction tax value/accounting value, where both these values are those at the end of the earlier period. FA02/SCH29/PARA116F caps the amount of any credit to the net amount of previous debits on the asset less previous credits on the asset.

Primacy of other parts of Schedule 29

FA02/SCH29/PARA116G contains provisions to ensure that where all or part of the difference is brought into account under other paragraphs of Schedule 29 that part is not brought into account again. The relevant other paragraphs are Paragraph 12 (reversal of accounting gain CIRD12560), Paragraph 15 (gain on revaluation CIRD13050) and Paragraph 17 (reversal of accounting loss CIRD13090).

Paragraph 116B does not apply to a chargeable intangible asset in respect of which a fixed rate election has been made under FA02/SCH29/PARA10 (see CIRD12905).

(Prior to FA05, similar legislation was contained in FA02/SCH29/PARA116A. That paragraph was repealed by FA05, and replaced by Part 13A of Schedule 29.)