IFRS accounting vs. country statutory accounting

A reader has written to me asking for a better understanding of the cash tax impact of adopting IFRS accounting vs. a country's existing statutory accounting.

As stated in the table with my posting of 27 February, countries around Europe vary in the speed of adoption of IFRS for local legal entity statutory accounts. While there is nothing automatic about the process, I do expect that with the passage of time, every country in the European Union will eventually move to a situation where company accounts are prepared solely under IFRS, although not necessarily very soon.

When that happens, the local tax return will have to start from the IFRS numbers, as they will be the only accounts. I expect each country to have its own rules for determining what adjustments are then made to the IFRS profit to determine taxable profits. Each country will also have to address the transition from local GAAP to IFRS, which as we have seen in the UK gives rise to many complex issues.

Mohammed Amin