INCOME TAX ASSESSMENT ACT 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-G - Calculating the average values  

Special rules about values and valuation

SECTION 820-680   Valuation of assets, liabilities and equity capital  

820-680(1)  


For the purposes of this Division, an entity must comply with the *accounting standards in determining what are its assets and liabilities and in calculating:


(a) the value of its assets (including revaluing its assets for the purposes of that calculation); and


(b) the value of its liabilities (including its *debt capital); and


(c) the value of its *equity capital.

Note:

This requirement to comply with the accounting standards is modified in certain cases (see sections 820-310 , 820-682 , 820-683 and 820-684 ).

820-680(1A)  


In particular, for the purposes of this Division, the entity has an asset or liability at a particular time if, and only if, according to the *accounting standards, the asset or liability can or must be recognised at that time.
Note:

This application of the accounting standards is modified in certain cases (see sections 820-682 and 820-683 ).

Requirements for revaluation of assets

820-680(2)  
A revaluation of assets mentioned in paragraph (1)(a) must be made by a person:


(a) who is an expert in valuing such assets; and


(b) whose pecuniary or other interests could not reasonably be regarded as being capable of affecting the person ' s ability to give an unbiased opinion in relation to that revaluation.

Note 1:

The entity must also keep records in accordance with section 820-985 about the revaluation, unless the exception in subsection (2A) of this section applies.

Note 2:

This subsection also applies to some revaluations that are not allowed by the accounting standards (see subsection 820-684(5) ).

Revaluation reflected in statutory financial statements for the same period

820-680(2A)  


A revaluation of an asset need not comply with subsection (2) if:


(a) the revaluation is for the purpose of the entity calculating the value of its assets for the purposes of this Division as applying to the entity for a particular period; and


(b) the entity is required by an Australian law to prepare financial statements for a period that is or includes all or part of that period; and


(c) those financial statements reflect the revaluation.

External validation of a revaluation made internally

820-680(2B)  


A revaluation of assets mentioned in paragraph (1)(a) may be made by a person (the internal expert ) if:


(a) apart from this subsection, paragraph (2)(b) would prevent the internal expert from making the revaluation, but only because, in making it, he or she would be:


(i) performing duties as an employee of the entity; or

(ii) providing services under an *arrangement with the entity that is substantially similar to a contract of employment; and


(b) another person (the external expert ):


(i) is not prevented by subsection (2) from making the revaluation; and

(ii) has reviewed the methodology for making it (including the validity of any assumptions to be made, and the accuracy and reliability of the data and other information to be used); and

(iii) has agreed that that methodology is suitable for making it; and


(c) the internal expert makes the revaluation in accordance with that methodology.

Note:

This subsection also applies to some revaluations that are not allowed by the accounting standards (see subsection 820-684(5) ).

Revaluation of individual assets

820-680(2C)  


Subsection (1) does not prevent the entity from revaluing one or more assets in a class of assets (as distinct from revaluing all the assets in the class) if the value of no asset in that class has fallen since the entity last calculated the total value of all the assets in that class in accordance with the *accounting standards. When further revaluation of assets required

820-680(2D)  


If:


(a) the entity revalues one or more assets (whether constituting a class of assets or not) for the purpose of calculating the value of its assets for the purposes of this Division as applying to the entity for a particular period (the first period ); and


(b) the revaluation is not required by the *accounting standards; and


(c) if the revaluation had been required by the accounting standards, the entity could have relied on it in preparing financial statements that the entity is required by an Australian law to prepare for a period (the later period ) that ends after the first period;

the entity may also rely on the revaluation in calculating the value of its assets for the purposes of this Division as applying to the entity for a period that is or includes all or part of the later period.

820-680(2E)  


If subsection (2D) does not permit the entity to rely on the revaluation in calculating the value of its assets for the purposes of this Division as applying to the entity for a period that is later than the first period, the revaluation is disregarded in determining whether subsection (1) requires the entity to revalue the one or more assets in calculating the value of its assets for those purposes.
Note:

As a result, the entity may not be required to make a further revaluation of the one or more assets. However, if the entity does not, it must use the value of the one or more assets that is reflected in financial statements for the relevant period that comply with the accounting standards.

Accounting standards need not otherwise apply to the entity

820-680(3)  
Subsection (1) has effect whether the *accounting standard would otherwise apply to the entity or not.


 

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