ENTERPRISE REORGANISATION. TAX ACCOUNTING DURING ENTERPRISE REORGANISATION IN UKRAINE | UBC
Tax accounting during enterprise reorganisation: how practice changed
The earlier material reviewed paragraph 153.15 of the Tax Code, which at that time set out in detail the tax consequences of terminating a legal entity through reorganisation. The material is important mainly for analysing historical transactions and transfer acts prepared while the relevant version of the legislation was in force.
Transfer of assets and inventories to the successor
The carrying value of fixed assets and intangible assets of the terminating legal entity was included in the corresponding groups of the successor on the date the transfer act was approved. Those assets were then depreciated under the general procedure. The cost of inventories also moved into the successor's tax accounting on that date.
If the right to recognise an expense had not arisen before the transfer act was approved, the successor recognised the expense when the prescribed conditions were later met. The same approach applied to expenses accounted for under special rules, including transactions in securities, derivatives and other financial instruments.
Income, losses and property
Income accrued by the terminating entity but not yet included in taxable income also passed to the successor. A negative taxable amount and certain special losses could be taken into account by the successor under the procedure provided by the version of the Code then in force.
Funds or property received by the successor from the legal entity in connection with the reorganisation were not included in the successor's income under the rule described in the historical material.
How to use this material
For a modern reorganisation, it is not enough to apply the earlier wording mechanically. The form of reorganisation, transaction date, current version of the law, content of the transfer act, accounting balances, tax differences and procedure for transferring rights and obligations must be determined. The earlier material helps reconstruct the logic of past transactions but does not replace checking the rules in force on the date of the specific reorganisation.
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