Tax accounting valuation options

What are tax accounting valuation options

Tax accounting valuation options are important action parameters of tax accounting policy. Their importance in the context of corporate tax planning is much greater than that of the tax accounting options. The tax assessment options can be broken down into

  • Options when determining the acquisition or production costs,
  • Options based on the tax accounting valuation rules,
  • Depreciation options,
  • Options in the valuation of liabilities, provisions or tax-free reserves

tax acquisition costs

While there are hardly any options when determining the tax acquisition costs, there are a number of options when determining the production costs, especially with regard to the inclusion of certain Overhead. However, these inclusion options can only be used to a limited extent as action parameters in terms of tax accounting policy, because the taxpayer is generally bound to a choice made in later years due to the principle of valuation continuity. Deviations from the consistency of inclusion are only possible in justified exceptional cases.

Tax valuation options

Tax valuation options arise mainly on the basis of the tax balance sheet valuation, since the exercise of the tax balance sheet valuation rules is usually not subject to the requirement of constant valuation.

In addition, there are a large number of tax depreciation options (tax depreciation), since a specific depreciation method only applies to the individual asset. For example, an entrepreneur who purchases two identical machines in one year, each with a ten-year useful life, can write off one machine with 10% pa linearly constant, the second using a geometric-degressive method. If he buys two more machines of the same type in the following year, he can choose the tax depreciation for these machines in a different way.

Requirements for exercising

The prerequisite for exercising the depreciation option is that the prerequisites for the depreciation used are met in each case. There is no binding due to a choice of depreciation for another depreciation object and also does not follow from the commercial law principle of continuity of valuation.

Options for the valuation of liabilities are rare and come into consideration especially for liabilities in foreign currencies. The prerequisite is that the exchange rate of the foreign currency becomes a Balance sheet date rises above the rate when the liability was entered into, but falls again on a later reference date and that the liability still exists on both reference dates. Options in the valuation of provisions often exist to a considerable extent, as these are usually factual options (discretionary leeway) that are seldom restricted by the principle of continuity of valuation. Options for the valuation of tax-free reserves are rare due to the prerequisites for creating tax-free reserves, but in individual cases they can have considerable weight.

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