Guide A: Guide to thin capitalisation

Modifications to the accounting standards for non-ADI entities

To adjust for certain impacts of the 2005 adoption of Australian equivalents to International Financial Reporting Standards, the thin capitalisation regime was modified in relation to the use of accounting standards for identifying and valuing an entity's assets, liabilities and equity capital. It does this by providing for the accounting standard treatment of specified assets and liabilities to be disregarded in certain circumstances. These modifications only apply to non-ADI entities.

Circumstances in which certain assets and liabilities are not permitted to be recognised by particular entities for thin capitalisation purposes relate to deferred tax assets and liabilities within the scope of AASB 112 Income taxes, and assets and liabilities arising from defined benefit plans within the scope of AASB 119 Employment Benefits.

Legislative reference: section 820-682.

In addition, particular entities may choose to recognise or revalue certain intangible assets, contrary to the relevant accounting standard. This primarily relates to intangible assets within the scope of AASB 138 Intangible Assets.

Legislative references: sections 820-683 and 820-684.

These modifications are applicable to an entity from its first income year starting on or after 9 December 2008.

Sections within 06 Determining average values

• Values of assets, debt, other liabilities, equity and other matters
• Revaluing assets
• Modifications to the accounting standards for non-ADI entities
• ATO's discretion
• Average values
• Examples