PLJ Volume 82 Number 1 -03- Myrvilen M. Alviar & Cherry Vi M. Saldua-Castillo - When Accounting...

WHEN ACCOUNTING MEETS TAX How THE INTERNATIONALACCOUNTING STANDARDS AFFECT PHILIPPINE INCOME TAXATION

i1yrvilenL AlviarmiddotmiddotCheny Vi M Saldua-Castillo

Globalization opened new doors to investors all over the world Cross-border trading and investments have become commonplace Language barriershave been broken down and not soon after were efforts to break down fmanciallanguage barriers as well The solution to the problem of non-comparability offmancial statements (the main bases for prudent investment decisions) is theadoption across countries of the International Accounting Standards (IAS) and theInternational Financial Reporting Standards (IFRS)

To be competitive in the international market the Philippines adoptedmost of the IAS and IFRS in 20051 Mr Wilson P Tan Head of the AccountingStandards Group of SGV amp Co (Ernst amp Young) in his presentation in the PICPAAnnual National Convention (2006)2noted that dle IAS and IFRS has broad anddeep business implications such as on tax planning management reporting systemsinvestor relations employee and executive compensation employee benefit plansperformance indicators corporate fmance and structured financial products andfmancial accounting and reporting

This paper will focus on dle effects of the IAS on dle income taxcomputation As we all know taxes are the very lifeblood of dle government whoseprompt and certain availability is an imperious need) In the Philippines taxcomputation is intimately connected with accounting Inherent differences between

bull Winner of the Iuliano Ricalde Prize for Best Paper in Taxation Law (2(HI7)The authors would like tothank I1s Fdiza i Peralta Partner and r--Ir1aron C Escartin Senior Director both of the Tax Diyision ofS(~Vamp Co for their guiJancc anJ support to the authors in this undertaking

Junior 1Sociate Picazo Buyco Tan Fider and Santos Law Offices 11B College of Law Uruycrsityof the Philippines (2ilO7) BS Business 1dministration aim Itlllrle College of BusineS AdministrationUniyersity of the Philippines (2(XXI)

Senior 1Sociate Tax Diyision SyCip Gorres Velayo and Company (SGV amp Co) CcrLified PublicAccountant 11B College of Law Unicrsity of the Philippines (2007) BS Business Idministration andAccountancy College of Business Adminitration University of the Philippines (2000)

I In the Philippines the IAS is called the Philippine Accounting Standards (PAS) and the IFRS is calledthe Philippine Financial Reporting Standards (PFRS)

o Wilson P Tan34 Suryiying IFRS 1yailablchttpwVwpicpacompharticlesWP I 2(IY20Dec2(120062()PCPA2(IANC2(ISurYiing2(1FRS-DNf December 20 2006 17

Commissioner of Internal RelTnue S Pineda 21 SCRA 110 (17)

tax accounting coupled with the new differences brought about by the lAS spellconfusion in the minds of taxpayers Considering the absence of clear cut taxguidelines tax compliance and consequently tax collection is in jeopardy

To show that a tax-accounting disparity actually exists this paper outlinesthe differences between accounting and tax treatment of the items of gross incomeand allowable deductions It also shows the past and current solutions put forth bythe government and its efficacy and shortcomings This paper will also show howother countries - the United States United Kingdom and Germany -- areresponding to the changes brought about by the IAS Finally this paperrecommends the following a) the introduction of short term stop-gap and longterm solutions ranging from a careful study of the lAS b) the training of taxpayersand revenue examiners c) the issuance of definitive revenue regulations to set clearguidelines on how to compute income taxes (taking the IAS into consideration) d)certain amendments to the Tax Code and e) the issuance of a definite position onthe book-tax (accounting and tax) conforrnitydebate

With the globalization of world economy and trade liberalizationinternational trade barriers are being eroded Doing business across borders is nowpossible and investors could invest their money anywhere in the globe Howeverto convince them to part with their capital the financial statements of prospectiveinvestments should be transparent reliable and comparable Previously anobjective comparison of financial statements was almost impossible with thedifferent accounting standards in place in different countries

In order to set a level playing field countries around the world includingthe Philippines have adopted the new international accotmting standards (IAS) It isenvisioned that with the adoption of the lAS we will be able to enhance thecomparability and understandability of financial statements which will in effect beable to develop the countrys global competitiveness as well as promote greaterinvestor protection4 Thus from an investors point of view the shift to IAS isclearly beneficial

However from the point of view of tax authorities the shift to IAS bringsabout many problems In the Philippines under Section 43 of the Tax Code as ageneral rule taxable income shall be computed upon the basis of the taxpayersannual accounting period (fiscal year or calendar year as the case may be) inaccordance with the method of accounting regularly employed in keeping the books

Primer on SEes Initial Adoption and Implementation of International Accounting Standards (lAS) Statement of Financial Accounting Standards (SFAS) AvaibblehttpwwwsecgovphprimerIAS20primerpdL April 3 2002 [3-4]

of such taxpayer5 A literal reading of this provision implies that the income forfinancial accounting putposes would be the same for tax pUIposes However thelatter portion of said Section 43 states that if no such method of accounting hasbeen so employed or if the method employed does not clearly reflect the incomethe computation shall be made in accordance with such method as in the opinion ofthe Commissioner clearly reflects the income

Over the years Philippine tax authorities usually looking to USprecedents have developed certain tax principles which deviate from that ofaccounting Thus for particular transactions which have a set tax treatmentdifferences between the tax treatment and accounting treatment will necessarilyarise6 and these shall be treated as reconciling items for putposes of computingtaxable income Consequently with the shift to lAS the number of reconcilingitems has more than doubled

This paper aims to analyze the effects of the new IAS on Philippineincome taxation specifically the differences between accounting and tax treatmentof certain transactions before and after the adoption of certain lASS and theBureau of Internal Revenues stop-gap solution to the current problem This paperwill also show the view from the international plane - how the United StatesUnited Kingdom and Germany are responding to changes brought about by theIAS With this background we hope to help the country cope with this sweepingchange - a change that is here to stay

SEe 43 General Rule - The taxable income shall be computed upon the basis of the taxpayersannual accounting period (fiscal year or calendar year as the case may be) in accordance with the method ofaccounting regularly employed in keeping the books of such taxpayer but if no such method of accountinghas been so employed or if the method employed does not clearly reflect the income the computation shallbe made in accordance with such method as in the opinion of the Commissioner clearly reflects the income Ifthe taxpayers annual accounting period is other than a fiscal year as defined in Section 22(Q) or if thetaxpayer has no annual accounting period or does not keep books or if the taxpayer is an individual thetaxable income shall be computed on the basis of the calendar year

6 Revenue Memorandum Circular (hereinafter RMC) 22-2004 Apri112 2004 providesIn case of difference between the provisions of the Tax Code and the

rules and regulations issued implementing the said Tax Code on one hand and thegenerally accepted accounting principles and the generally accepted auditingstandards on the other hand the provisions of the Tax Code and the niles andregulations issued implementing the said Tax Code shall prevail xxx

7 Lina Figueroa The Extra Challenge 11R Preparation Under The New Accounting StandardsAvailable httpwwwpunongbayan-araullocomlpnawebsite pnahomensfl section docsKSS09D 31-1-Qsect January 312006 [6]

8 IAS 16 on Propeny Plant and Equipment IAS 19 on employee benefits IAS 23 on borrowing costsIAS 36 on impainnent losses IAS 37 on Provisions Contingent Labilities and Contingent Assets and IAS 38on Intangible Assets among others

The Philippine System of Taxation was adopted from the United StatesUpon the American occupation there was already a fairly complete system oftaxation in force in the country9 This system was continued in force by themilitary authorities who at the same time introduced few changes until the OvilGovernment assumed charge of the subject Meanwhile in the United Statesincome was selected as the norm of taxation 10 The policy was to come up with afair system of taxation by placing the burden of tax on those best able to paythereby mitigating the evils arising from inequalities of wealth by a progressivescheme of taxation Thus the United States adopted its Income Tax Law whichwas later on extended to the Philippine Islands

The first Philippine income tax law enacted by the Philippine Legislaturewas Act No 2833 which took effect on January 1 1920 Act No 2833 substantiallyreproduced the United States (US) Revenue Law of 1916 as amended by USRevenue Law of 1917 Being a law of American origin the authoritative decisionsof the official charged with enforcing it in the US had peculiar persuasive force inthe Philippines I I

Philippine tax law developed on its own over time but American influencecontinues to permeate our tax system such that up to the present Americanjurisprudence and writings are referred to in the interpretation of our own tax laws

The Accolillting Standards Council (hereinafter ASC) established by thePhilippine Institute of Certified Public Accountants (PICP A) was fOlmallylaunched on November 18 1981 to formalize the accounting standard-settingprocess in the Philippines11 Its main function is to establish and improveaccounting standards that will be generally accepted in the Philippines Suchstandards would generally be based on (1) existing practices in the Philippines (2)research or studies to be undertaken at the direction of the Chairman of theCouncil (3) available literature on the topic or subject under study which wereprepared locally or internationally and (4) statements recommendations studies orstandards etc issued by other standard-setting bodies such as the International

9 Omrchill vs Wfeny 32 Phi 587 (1915)10 Madrigal vs Wfeny 38 Phi 418 (1918)11 Commissioner of Internal Revenue vs Juliane Baier-Nickel 500 SCRA 93-94 (2006) citing 1 F

Dalupan NATIONAL INTERNALREVENUE CoDE ANNOTATED 25 (1964) and 1 J Arafias ANNOTATIONSANDJURISPRUDENCEON 1HE NATIONALINTERNALREVENUECoDE as Amended 34 (1963)

12 The Accounting Standards Council (hereinafter laquoASC) Availablehttpwwwpicpacomphadbsettingstrhtm1[2]

Accounting Standards Conunittee (hereinafter IASC) and the FinancialAccounting Standards Board (hereinafter FASB)13

As part of its mandate the ASC issues Statements of Financial AccountingStandards and Interpretations These statements represent the generally acceptedaccounting principles in the Philippines To be reliable and acceptable financialreports of corporations and other business entities are prepared using theseStatements as bases

In the past the practice of ASC is to add to or adjust an existing IAS inaccordance with the accounting practice in the Philippines and adopt the same asthe Philippine accounting standard in the form of Statement of FinancialAccounting Standards (hereinafter SFAS)14 The adjustments made resulted toinconsistencies between SFAS and IAS Towards the end of 2000 the ASC andSEC implemented a project to replace existing SFAS with their counterpart IASISSince the former are numbered according to topic their numberings were alignedwith the equivalent IAS With the adoption of most of the IAS in 2005 thePhilippine SFAS (or Philippine GAAPI6 and GAAS17) is one with lAS therebyunifying the Philippine accounting system with lAS and the world

The Imernational Accounting Standards or IAS is a set of globallyrecognized accounting standards and procedures relating to the presentation offinancial statementsl8 It is a set of standards that prescribes how certaintransactions and other events should be reflected in the financial statements andcompliance therewith is a must for a fair and credible presentation of financialstatements

The IAS is issued by the International Accounting Standards Council orlASe Formed in 1973 the IASC was originallyformed by the accountancy bodiesof Australia Canada France Germany Ireland Mexico Netherlands UnitedKingdom and the United Statesl9 Over time more nations adopted IAS in theiraccounting system

L1 Id at [1]

H Primer on SEes Initial Adoption and Implementation of International Accounting Standards (IAS) Statement of Financial Accounting Standards (SFAS) AvailablehttpwwwsecgovphprimerIAS20primerpdf [6]

I Id16 Generally Accepted Accounting Principles17 Generally Accepted Auditing Standards18 See note 14 supra 191d

The IAS is one of the sources of Philippine accmillting standardsThrough the years the ASC adopted some IAS suitable to the Philippine setting butin the year 2005 the Securities and Exchange Commission (hereinafter SEC)adopted the implementation of most of the IAS to improve the qualitycomparability and transparency of financial information

In the Philippines the tax and accounting systems are two differentsystems goycrned by separate bodies and subject to different sets of rulesregulations and standards Taxation is principally governed by Republic Act 8424 orthe National Internal Revenue Code and the rules and regulations implementing itwhile accounting is subject to Philippine Accounting Standards (PAS) andPhilippine Financial Reporting Standards (PFRS) Further taxation is the concernof the BIR while generally accepted accounting principles in the Philippines areadopted by the ASC

With the requirement of adoption of most of the IAS in the year 2005 thedifferences between the accounting and tax treatments of the taxability of incomeand deductibility of expenses became more apparent The government has notcome up with a single legislation or regulation codifying the rules and regulationsThough there are some rulings on lAS-related matters found in jurisprudence andBIR rulings these apply to corporations on a case-tQ-case basis Hence taxpayersare still at loss as to the proper method of determining their taxable income

Some of the effects of the IPS on the computation of corporate incometaxes have been articulated by Lina P Figueroa in her article entitled The extrachallenge ITR preparation under the new accounting standards2o She noted thatthe changes introduced by the new IAS have widened the gap between theaccounting rules and the tax rules and have as a consequence created morecomplexities in tax reporting and compliance The differences between financialreporting and tax accounting will have to be reported as reconciliation items in theincome tax returns The list of potential reconciling items under the newaccounting standards has more than doubled though the extent to which thesewould be applicable to particular companies would differ depending largely on thenature of the business and its transactions There would be more of the permanentand temporary differences as well as deferred tax assets or liabilities

We agree with her observations and add that with the complexity of theIAS and the lack of regulations from the BIR codifying the differences broughtabout by the lAS the cost of compliance of corporations have increased since theyneed to hire the services of accounting firms in order to arrive at the correct taxable

~o Lina Figueroa The Extra Challenge ITR Preparation Under The New Accounting StandardsAvailable httpwwwpunongbaym-araullocomlpnawebsite pnahomensf section docsKSS09D 31- 1-Qsect January 31 2006

income This of course is music to accoU1ting finns ears as this translates to anincrease in fees for advice on how to apply the lAS fees for the correctcomputation of income tax and fees for seminars on IAS For those who donthave the resources to hire accoU1ting finns it is very likely that they will simply notcomply with the new requirements brought about by the IAS

Another observation of Ms Figueroa in her article is that in case of errorsin the tax return which are later amended any ovetpayment will entail opportnnitycosts because fU1ds will be unnecessarily tied up as creditable taxes paid waiting tobe utilized Furthermore an amendment extends the period when the return will beopen to BIR audit Underestimation of the tax due on the other hand exposes thecompany to penalties

She also predicted quite reasonably that tax examination would probablybe the next challenge considering that audited financial statements are required tobe submitted and used in certain cases to select tax cases for audit These are alsothe basis used by tax examiners during tax investigations In relation to this wepredict that extensive training for tax examiners on the differences between tax andaccoU1ting is definitely needed Audit procedures to be observed by revenueofficers in the conduct of audit of tax cases and in their submission of reports ofinvestigation should be contained in Revenue Audit Memorandum Orders(RAM0s)21 but no such RAMO on how to audit income tax returns taking intoconsideration the lAS have been released by the BIR

CDnsidering too that there is as yet no BIR regulation codifying thedifferences between IAS and tax it appears that both taxpayers and tax examinersare in the dark as to the effects of the IAS on income tax

II PmLIPPINE CoRPORATE TAX SYSTEM AND THE PHILIPPINEACCOUNTING SYSTEM

The Tax Code prescribes the internal revenue taxes imposed within thePhilippine archipelago In computing taxable income Section 43 of the CDdeprescribes as basis the accoU1ting method regularly employed in keeping the booksof the taxpayer22 There is no uniform accoU1ting method prescribed for taxpayersInstead the Tax Code allows the taxpayer to adopt such method and system of

21 BIR Revenue Adm O (hereinafter RAO) No 1middot99 Section 3(g) (1999)22 TAX OJDE sect 43

accounting which is best suited to his purpose23 As implied by Section 43 of theTax Code The Commissioner will not interfere with the taxpayers choice ofaccounting method as long as it clearly reflects his income

Even if the Tax Code recognizes the method of accounting used by thetaxpayer in determining taxable income this does not mean that the net incomecomputed under the accounting method in place is the basis of the tax due Asexplained by the Supreme Court24

While taxable income is based on the method of accounting usedby the taxpayer it will umost always differ from accounting income This isso because of a fundamental difference in the ends the two concepts serveAccounting attempts to match cost against revenue Tax law is ainled atcollecting revenue It is quick to treat an item as income slow to recognizedeductions or losses Thus the tax law will not recognize deductions forcontingent future losses except in very limited situations Good accountingon the other hand requires their recognition Once this fundamentaldifference in approach is accepted income tax accounting methods can beunderstood more easily 00(

The accounting method is employed in preparing the books of thetaxpayer and the financial reports for various users such as the stockholdersmanagement creditors and employees Their basic concern is the economicperformance and financial standing of the corporation On the other hand taxreturns are prepared for the State to aid it in the generation and collection ofrevenue The use of accounting method in the computation of taxable income asreflected in tax returns may not serve this purpose

The Commissioner subject to the review by the Secretary of Finance hasthe exclusive and original jurisdiction to interpret the provisions of the Tax Codeand other tax laws25 In this regard the Commissioner through the BIR issuesopinions interpreting the tax laws in the form of rulings and other issuances Theseinclude the following

a) ReID7JERegfdations (RRs) These are issuances signed by theSecretary of Finance upon recommendation of the Commissioner that specify

23 BIRRevenue Reg (hereinafterRR) No2 sect 167(1940)providesSEe 167 Mdhais if ~ - It is recognized that no uniform method of

accountingcan be prescribed for all taxpa~rs and the law contemplates that each taxpa~rshall adopt such forms and systemsof accounting as are in his judgment best suited to hispurpose Each taxpa~r is required by law to make a return of his true income He musttherefore maintain such accounting records as will enable him to do so Any approvedstandard method of accountingwhich reflectstaxpa~rs incomemay be adopted xxxbullbull

Consolidated MinesInc vs Court of Tax Appeals58 SCRA623 (1974)citing 33 AmJur 2d 6882 TAX CDDE sect 4

prescribe or define rules and regulations for the effective enforcement of theprovisions of the Tax Code and related statutes26

b) RelpoundI1J(pound Menvrarrlum Orders (RMO) These are directives orinstructions outlining procedures techniques methods processes operationsactivities work flow and the like which are necessary to carry out programs or toachieve policy goals and objectives These issuances may be of general or of limitedscope yet in any case require definite compliance by those concerned They aredirected to the taxpayers definitely stated or unmistakably implied thereat27

c) RelpoundI1J(poundMenvrarrlum Ruling (RMR) These are rulings opinionsand interpretations of the Commissioner with respect to the provisions of the TaxCode and other tax laws as applied to a specific set of facts with or withoutestablished precedents and which the Commissioner may issue from time to timefor the purpose of providing taxpayers guidance on the tax consequences in specificsituations28

d) RelpoundI1J(poundA dninistratilpound Orders (RA 0) - These Orders cover subjectmatters which deal strictly with more or less permanent administrative set-up of theBIR Delineations of organizational structures statements of functions and orresponsibilities definitions and delegations of authority staffing and personnelrequirements standards of performance establishment of BIR-wide programsinstallation of systems and the like are most likely subject matter of RevenueAdministrative Orders These issuances are for general guidance complianceand or information29

e) RelpoundI1J(poundMenvrarrlum Ciradars (RMC) These issuances disseminateand embody pertinent and applicable portions as well as amplifications of the rulesprecedents laws regulations opinions and other orders and directives issued by oradministered by the Commissioner and the BIR for the information guidance orcompliance of revenue personnel30

f) RelpoundI1J(poundBulletins (RB) These refer to periodic issuances noticesand official announcements of the Commissioner that consolidate the BIRspOSItIOn on certain specific issues of law or administration in relation to theprovisions of the Tax Code relevant tax laws and other issuances for the guidanceof the public)l

26 BIR 1ssuances and Rulings Available lthttpwwwbirgovphiss_rulissuanceshtm gt [1]27 BIRRAO No 1-99 sect 3 see note 21 supra28 BIR Issuances and Rulings see note 26 supra29 BIR RAO No 1-99 see note 27 supra30 BIRRAO No 1-99 see note 27 mpra31 BIR 1ssuances and Rulings see note 26 supra

g) BIR Ruling These are official position of the BIR to queriesraised by taxpayers and other stakeholders relative to clarification and interpretationof tax laws)2 They apply only to a particular case or query base on the facts asrecounted by the taxpayer At the end of each mling there is a disclain1er whichstates that the mling is being issued on the basis of the facts as represented and thatif upon investigation it will be disclosed that the facts are different then the rulingshall be considered as null and void

Revenue regulations being the interpretation of the Tax Code and taxlaws are sibled by the Secretary of Finance upon the recommendation of theCommissioner With regard to the other issuances they are signed md issued bythe Commissioner or a duly authorized BIR officer They shall be submitted to theSecretary of Finance as nuy be required33 Meanwhile when the BIR renders anopinion by means of a circular or memorandum no publication is necessary for itsvalidity because it merely interprets a pre-existing law34 Likewise theirinterpretations while not binding upon courts are entitled to great weight as theconstruction comes from the branch of the government called upon to implementthe law35

3 BIR Issuances on Taxpayers Use of Accounting Methods For InternalRevenue Tax Purposes

As explained earlier both the tax and the accolillting systems servedifferent ends With this in mind some taxpayers have acqurred the practice ofmaintaining two separate books lillder different methods to better serve the ends ofthese two concepts The BIR issued RMC No 44-2002 to clarify the taxpayers useof accounting methods for internal revenue tax purposes It specifies that thepractice of some taxpayers of filing their tax returns under an accounting methodthat is different from the method allowed in keeping their books of accounts shouldbe stopped immediately RMC No 44-2002 was supplemented by RMC No 22-2004

RMC No 22-200431 set forth the definitive rule in case of differencesbetween the Tax Code and such rules and regulations issued in relation thereto andthat of generally accepted accounting principles (hereinafter GAAP) and generallyaccepted auditing standards (hereinafter GAAS) as approved and adopted by theASC It provides that the taxability of income and the deductibility of expensesshall be deteID1ined strictly in accordance with the provisions of the Tax Code andthe rules and regulations issued implementing it It went further and held that in

31 Id at [6]

Idatsect43 La Suerte Ggar and Ggarene Factory et al vs Court of To Appeals 134 SCRA 39 (1985) citing

Romualdez v Area 27 SCRA 8283 111 citing Sahria v Buenviaje 81 SCRA 722

36 See note 6 supra

case of differences between the provisions of the Tax Code and the rules andregulations issued implementing it on one hand and the GAAP and GAAS on theother hand the provisions of the Tax Code and the rules and regulations issuedimplementing the said Tax Code shall prevail

This RMC seems to conflict with Sec 43 of the Tax Code the law it oughtto implement While Sec 43 recognizes the accoWlting method used in computingtaxable income RMC 22-2004 prescribes the supremacy of the Tax Codeprovisions over GAAP and GAAS in case of conflict between the tax andaccounting treatment of taxable income As explained earlier the two systems willalways differ in computing taxable income because of the inherent differences ofthe two systems

The Tax Code enumerates the items of gross income in Section 32 (A)For most of these items the IAS has a corresponding standard on how each item ofgross income should be recorded and treated in the books of the corporation Theapparent similarities and or differences in accoWlting and tax treatment of some ofthese items are outlined below

Interest is the compensation allowed by law or fixed by the parties for theuse or forbearance or detention of money37 Under the lAS interest income afinancial asset should be recorded initially at its fair utlue or the amount for whichan asset could be exchanged or a liability settled between knowledgeable willingparties in an arms length transaction38 Subsequently loans and receivables39

should be measured at amortized cost using the effective interest method The TaxCode and the rules and regulations implementing it have not set a method formeasuring interest income Hence tax follows accoWlting Nonetheless if in theopinion of the Commissioner the accounting method employed does not clearlyreflect the income he could always invoke Sec 43 of the Tax Code or Sec 5040 incases of related party transactions

)7 Spouses Toring vs Spouses alan CA-GR CV NO 76831)8 Deloine Touche Tohmatsu Summaries of International Financial Reporting Standards (IFRS)

(hereafter Sununaries ofIFRS) IAS 39 Available httpwwwiaspluscomlstandardias39htm(36)) Id at (27) It provides

Loans and receivables are non-derivative- financial assets with fixed ordeterminable payments originated or acquired that are not quoted in an activemarket not held for trading and not designated on initial recognition as assets at fairvalue through profit or loss or as available-for-sale xxx

lt0 TAX CODE sect 50 providesSEe 50 Allocation of Income and Deductions - In the case of two

or more organizations trades or businesses (whether or not incorporated andwhether or not orgaaized in the Philippines) owned or controlled directly or

The same standard applies to transactions between related parties egbetween a parent company and a subsidiary or an affiliate A number of BIRrulings and issuances and jurisprudence tackle the matter Revenue MemorandumOrder (hereinafter RMO) No 63-199941 which governs the imputation ofinterest income on inter-company loans and advances provides that the arn1Slength bargaining standard will be used as the ultimate test for detem1ining thecorrect gross income and deductions between two or more enterprises undercommon contro142 By arms length interest rate the Bureau refers to the rate whichwould have been charged at the time the indebtedness arose in an independenttransaction between lmrelated parties under similar circurnstances 4J

However not all transactions involving the transfer of money betweenrelated parties are loans hence taxable RMO 63-1999 applies to all forms of bonafide indebtedness including loans or advances of money or other considerationwhether or not evidenced by a written instrument and indebtedness arising in theordinary course of business out of sales leases or the rendition of services by orbetween members of the group or any other similar extensions44 But it does notapply to alleged indebtedness which is in fact a contribution of capital or adistribution by a corporation with respect to its shares 45 What is contentious is theidentification of the true nature of the transaction - whether it is a taxable loan oradvance or a mere distribution of capital Jurisprudence elaborates the meaning ofcapital contribution

In the case of Filimest Dezeloprrmt Corporation (FDC) u Co711lrussioner ofInternal Rezenue (hereinafter OR)46 the Omrt of Appeals reversing the etAtreated the interest-free cash advances by a taxpayer to an affiliate as capitalcontributions and not loans where the advances were in the nature of financialassistance to sustain an affiliates operational and capital expenditures The doctrinewas upheld in the recent case of Belle Corporation vs OR47 where the erA heldthat the advances extended by Petitioner to its affiliates subsidiaries were financialassistance for operational and capital expenditures hence the advances were notloans The same principle is observed in BIR Ruling DA-536-2004 where it wasruled that the advances made by a Singapore Head Office to its Philippine branch

indirectly by the same interests the ())mmissioner is authorized to distributeapportion or allocate gross income or deductions between or among suchorganization trade or business if he determines that such distributionapportionment or allocation is necessary in order to prevent evasion of taxes orclearly to reflect the income of any such organization trade or business

BIRReenue Memorandum O No 63-1999 (1999)4 Jd4) Jd44 Jei [d

4( Filimest Development ())rporation s ())nunissioner of Imemal Rewnue CA-GR SP No 72992December 16 2003

Belie Corporation middots ConmmSloner of Internal Reenue erA Gse No 6156 June 172005

which were used by the Branch as working capital and as payment for theacquisition costs of machinery and equipment necessary for its operation are in thenature of capital contributions

A lease is classified as a finance lease or an operating lease at its inception(ie when the agreement or commitment is made)48 Finance leases are those thattransfer substantially all the risks and rewards incident to ownership to the lessee49All other leases are operating leases50 Under the lAS income from operatingleases is recognized on a straight-line basis overthe lease term51 Thus if the leaseis for three (3) years and the rent for each year varies the total rental income for theentire term of the lease is summed up and allocated equally over the lease periodStated differently the total yearly rental income is the sum of the total rental incomefor the entire term divided by the lease period Also the rental income is allocatedthe same way even if the lessee pays the rent in advance

On the other hand the BIR treats rental income differently As ruled inBIR Ruling 003-2000 for income arising from rentals of property a taxpayer mustreport as part of the gross income advance rentals received during the taxable yearincluding rentals actually earned but uncollected as of the end of such period Thetax treatment of rental income is an exemption to the general rule espoused in Rule43 that taxable income shall be computed on the basis of the method of accountingregularly employed by the taxpayer Hence the taxpayer may continue keeping itsbooks following the IAS but for tax reporting purposes rental income (includingadvance payments) must be recognized when actually earned regardless of itsaccounting method

The difference in accounting and tax treatment of rental income results todifferences in the computation of taxable income especially if advance payments aremade In which case advance payment has no effect on taxable income sinceincome under accounting practice is recorded in the books as if they were receivedin the years to which the rent applies Meanwhile under the tax system the entireadvance payment is recognized immediately thereby increasing taxable income onthe period it was received As a consequence the tax due is also higher unlike underthe straight-line method established by IAS

lt Deloitte Touche Tohmatsu IAS 17 Available httpwwwiaspluscomlstandardias17htm (4)ltoldold

Idat (10)

The Tax Ogtde devotes a separate chapter for allowable deductionss2 Itapplies to all taxpayers except those earning compensation income arising frompersonal services rendered under an employer-employee relationship

The IAS provides standards on how these deductions should be recordedand treated in the books of the co1poration Likewise the Tax Ogtde and otherrulings and issuance provide guidelines these deductions should be treated

The Tax Ogtdeallows as deductions from gross income business expenses -all the ordinary and necessary expenses - paid or incurred during the taxable year incarrying on or which are directly attributable to the development managementoperation and or conduct of the trade business or exercise of a professions3Deductible expenses include (1) salaries wages and other forms of compensation(2) travel expenses (3) rentals of properties and (4) entertainment amusement andrecreation expenses directly related to or in furtherance of trade To be deductiblethe taxpayer must substantiate with sufficient evidence such as official receipts orother adequate records (i) the amount of the expense being deducted and (ii) thedirect connection or relation of the expense being deducted to the developmentmanagement operation and or conduct of the trade business or profession of thetaxpayer

When rmgnized Under the Tax System business expenses are recognizedwhen paid (under cash basis accounting) or when the obligation accrues (underaccrual basis accounting)

In determining whether an expense has accrued for tax pUtposes referenceis made to US revenue law and jurisprudence Under the accrual method ofaccounting business expenses are deducted in the taxable year when the all-eventstest 54 has been met and when economic performancess has occurred Under theall events test as embodied in Treasury Regulations an accrual-basis taxpayer is

TAX CODE sect 34S3 TAX CODE sect 34 (A) (1) (a) Internal Revenue Service (United States Department of the Treasury) Available

httpwwwirsgovpublicationsp538ar02html dOe1880 provides that Under an accrual methcxl ofaccounting you generally deduct or capitalize a business expense when both the following apply

1 The all-events test has been met The test is met whena All events have occurred that fix the fact of liability andb The liability can be determined with reasonable accuracy

2 Economic performance has occurred xxx5 Id It provides that If your expense is for property or services provided to you or for your use of

property economic performance occurs as the property or services are provided or the property is used xxx

entitled to deduct a business expense for the taxable year in which all events haveoccurred which determine the fact of the taxpayers liability and in which theamonnt of that liability can be determined with reasonable accuracy56 Hence cashdoes not have to change hands before a business expense is deducted nnder theaccrual method of acconnting

Salaries WJFfS am aher farm if aJII1XI1Satian Under IAS 19 salariesbonuses holiday pay sick pay are considered as short-term benefits57 They shouldbe recognized as an expense in the period when the employee has rendered theservice Meanwhile profit-sharing and bonus payments should be recognized whenthe entity has a present legal or constructive obligation as a result of past events andwhen a reliable estimate of the obligation can be made

Under the Tax System the Tax Code adds a requirement as to when(taxable year) profit-sharing and bonuses should be allowed as deductions Theyare deductible only in the taxable year when the tax required to be deducted andwithheld therefrom has been paid to the BIR58 In the case of ING Bank N VManila Brarm u GR 59 the bonuses were accrued in 1996 and 1997 but weredistributed in the respective years following their accrual The petitioner averredthat its duty to withhold the tax due falls at the time of payment not at the time ofaccriJal However the crA held that the accrued profit sharing and bonuspayments should be subjected to withholding taxes in the year these aredeterminable and claimed as deductions for income tax purposes Thus for taxpurposes profit-sharing and bonuses should not be recognized as deductions unlessthe withholding taxes have been paid to the BIR

Adrertising cats The list of ordinary and necessary expenses in the TaxCode is not exclUsive Advertising expenses are another type of business expenseswhich are treated differentlynnder the acconnting and tax methods IAS 3860 statesthat if an intangible item does not meet both the definition61 of and the criteria62

S6 United States vs General Dynamics CDp 481 US 239 April 22 1987S7 Deloitte Touche Tohmatsu IAS 19 Available httpwwwiaspluscomstandardias19htm [4] It

defines shon-term benefits as those payable within 12 months after service is rendered such as wages paidvacation and sick leave bonuses and nonmonetary benefits such as medical care and housing xxx

S8 TAX CoDE sect 34 (K) provides(K) Additional Requirements for Deductibility of Cenain Payments -

Any amount paid or payable which is otherwise deductible from or taken intoaccount in computing gross income or for which depreciation or arJlonization maybe allowed under this Section shall be allowed as a deduction only if it is shown thatthe tax required to be deducted and withheld therefrom has been paid to the Bureauof Internal Revenue in accordance with this Section Sections 58 and 81 of thisGxIe

S9 CfA Case No 6187 August 9200460 Deloitte Touche Tohmatsu IAS 38 Available lthttpwwwiaspluscomlstandardias38htmgt61 Id IAS 38 defines intangible asset as an identifiable nonmonetary asset without physical substance

An asset is a resource that is controlled by the enterprise as a result of past events (for example purchase orself-creation) and from which future economic benefits (inflows of cash or other assets) are expected

for recognition as an intangible asset the expenditure on the intangible should berecognized as an expense when it is incurred Expenditure for advertising isamong these costs which are expensed when incurred

In the case of GR u GeneralFwls (Phils) Inc63 the Supreme Courtdistinguished advertising expenses which are expensed and those which areconsidered as capital assets hence amortized over a reasonable period of time Inthis case the manufacturers of Tang Calumet and Kool-Aid spent for mediaadvertising expenses The issue was whether these expenses are to be considered asordinary and necessary expenses or as capital expenditures If considered asordinary expenses they are allowable as deductions in the taxable year they wereincurred As a consequence the taxable income during the taxable will be greatlyreduced resulting to a lower amount of tax payable On the other hand as capitalexpenditures the amortization will be spread over a reasonable period of time Byspreading the advertising cost the reduction in taxable income is gradual and thetax payable is higher in the year the expenses are incurred as opposed to whenadvertising cost is expensed outright

The Supreme Court held in this case that the expenses are not ordinaryand necessary but are the capital expenditures because they were inordinately largeFor Tang alone the expense was half of the total marketing expense Further theexpenses were incurred in order to protect the taxpayers branch franchise This wasconsidered as analogous to the maintenance of goodwill or title to ones property

From this ruling it could be inferred that under the tax system advertisingexpenses could either be expensed or capitalized IAS however does not make thisdistinction

Prmisions Under the IAS64 a provision is a liability of uncertain timing oramount Examples of provisions are warranty obligations legal or constructiveobligations to clean up contaminated land or restore facilities and a retailers policyto refund customers A provision should be recognized when (1) an entity has apresent obligation Oegal or constructive) as a result of a past event (2) it is probablethat an outflow of economic benefits will be required to senle the obligation and(3) a reliable estimate can be made of the amount of the obligation

However under the tax system provisions are not deductible for incometax pmposes unless they meet the all-events test for recognizing an expense

62 ld IAS also provides that an enterprise should recognize an intangible asset whether purchased orself-created (at cost) if and only if (1) it is probable that the future economic benefits that are attributable tothe asset will flow to the enterprise and (1) the cost of the asset can be measured reliably

6~ Commissioner of Internal Revenue vs General Foods (Phils) Inc 401 SmA 545 (2003)(4 Deloitte Touche TohrnatsulAS 27 Available httpwwwiaspluscomlstandardias27htm

OrtJmizaticn ex~f3 Under IAS 38 start-up costs are recognized asexpenses when incurred65

Under the tax system in case of corporations expenses for organizationsuch as incorporation fees attorneys fees and accountants charges are ordinarilycapital expenditures but where such expenditures are limited to purely incidentalexpenses a taxpayer may charge such items against income in the year in which theywere incurred66 Thus if under the lAS organization expenses are expensed thesame are either expensed or capitalized under the tax system

Pre-operating ex~f3 Under IAS 38 pre-operating costs are recognized asexpenses when incurred67

Under the tax system they are capitalized Pre-operating expenses must bedistinguished from expenses incurred while the business has already commencedPre-operating expenses include amounts paid or incurred before and in anticipationof the start of the business in an activity for profit or the production of income(par 1033 page 379 US Master Tax Guide 1985)68 In this regard a corporation isconsidered to have begun business when it has commenced the activities for whichit was organized 69 Generally this occurs after the charter or article ofincorporation is issued (par 6163-6164 p 386 Vol 34 Am Jur 2d 1976 Ed)70

By way of an example investigatory expenses which include costs incurredfor analysis or survey of potential markets products labor supply transportationfacilities and site location incurred by the taxpayer are considered as pre-operatingexpenses which may be capitalized and amortized over a period of not less thansixty (60) months beginning the first month the corporation is actively inbusiness71 On the contrary expenses such as advertising market testing andpenetration salaries and wages paid to train employees and travel expenses incurredin lining up distributors and customers are not business start-up expenditures sincethey were incurred when the business has already commenced As such theseexpenses are not capitalized but are allowed as deductions in the taxable year inwhich they were paid or incurred72

6 Deloitte Touche Tohmatsu IAS 38 see note 64 slifJra

66 BIRRR No 2sect 120 (1940)67 Deloitte Touche Tohmatsu IAS 38 slIfJra note 636S BIRRuling No 102-1997 September 29199769Id70Id71Id72d

Borrowing costs are interest and other costs incurred by an entity inconnection with the borrowing of funds3 In case the borrowing cost was incurredin relation to the acquisition construction and production of a qualifying asset74 itshould be treated as part of the cost of the relevant asset under the AllowedAlternative Treatment of borrowing cost5 Simply put the borrowing should becapitalized

Under the Tax Code the equivalent provision is Section 43 (B) (3) whichstates that at the option of the taxpayer interest incurred to acquire property usedin trade business or exercise of a profession may be allowed as a deduction ortreated as a capital expenditure Thus while IAS impose that borrowing cost inrelation to the acquisition of an asset should be capitalized the Tax Code gives thetaxpayer the option to treat the borrowing costs as a deduction or as a capitalexpenditure

The Tax Code recognizes different type of losses6 These are (1)ordinary losses which are incurred in the trade business or profession or ofproperty connected therewith (2) capital losses from the sales or exchanges ofcapital assets or from securities which are capital assets becoming worthless and(3) special kinds of losses such as losses from wash sale of stocks and securitieswagering losses and abandonment losses in petroleum operations These losses areallowed as deductions in taxable income unless they are compensated for byinsurance or other form of indemnity77

73 Deloitte Touche Tolunatsu lAS 23 ami1aJle at httpwwwiaspluscomlstandardias23htm74 ld lAS 23 defines qualifying asset as an asset that necessarily takes a substantial period of time to

get ready for its intended use or sale

ld76 TAX CoDE sect 34 (0) It reads

(D) Losses -

(1) In GereraI - Losses actually sustained during the taxable year and not compensatedfor by insurance or other forms of indemnity shall be allowed as deductions

(a) If incurred in trade profession or business(b) Of property connected with the trade business or profession if the loss

arises from fires storms shipwreck or other casualties or from robberytheft or embezzlement

Irrpaimrnt if assets lAS 36 is dedicated to the impairment of assets 78 Itsobjective is to ensure that assets are carried at no more than their recoverableamount79 lAS 36 applies to assets such as land buildings machinery andequipment investment property carried at cost intangible assets goodwill andinvestments in subsidiaries associates and joint ventures

Under the lAS when an asset is impaired the loss is recognizedimmediately in profit or 10ss80 After the recognition of impairment loss thedepreciation charge for the asset is likewise adjusted in future periods to allocate theassets revised carrying amount81

Under the tax system impairment loss is not recognized for income taxpurposes because losses are not recognized unless evidenced by a closed andcompleted transaction82 As ruled in BlR Ruling DA-403-200383 even ifimpairment loss of an asset is reflected in the financial statements for financialaccounting purposes the same will not result in any tax benefit since no actual lossis sustained that may be allowed as deduction in the corporations taxable incomeSince impairment loss is not recognized in the computation of taxable income noadjustment in future depreciation is required to be made

An impairment loss being in the nature of an accounting standard whosepurpose is to reflect in the financial statements the true condition of the assetwould not be relevant for tax purposes inasmuch as such impairment loss is onlyan estimate of what is prudently believed to be an unrecoverable value in asubsequent sale of the asset or minimal estimated future cash flows arising fromthe continued use of the asset x x x It should be noted however that there is asyet no actual sale or disposal to speak of84

Under lAS 38 the impairment of an intangible asset except those withindefinite useful life is recorded as expense 85 If such impaired asset is

78 Deloine Touche Tohrnatsu IAS 36 trUliIaHeat hnp wwwiaspluscomlstandardias36htm79 Id According to IAS 36 an asset is inpWrd when its carrying amount exceeds its recoverable amount

Gm)ing tl11DI11 refers to the amount at which an asset is recognized in the balance sheet after deductingaccumulated depreciation and accumulated impairment losses Rermeralie tl11DI11 refers to the higher of anassets fair value less costs to sell (sometimes called net selling price) and its value in use

80Id81Id82 RR No2 sect 96 supra note 2383 November 1020038d8 Deloine Touche Tohrnatsu IAS 38 supra note 63

subsequently sold the gain or loss from the subsequent sale is computed as thedifference between the selling price of the asset and its carrying amount86 If theimpairment of loss is reversed the resulting profit or loss is immediately recorded

Impairment of intangible assets is also not recognized in the computationof taxable income This is in line with the general rule on losses that only lossesactually sustairm during the taxable year and not compensated for by insurance orother forms of indemnity shall b e allowed as deductions87 However BIR RulingDA-452-200488 citing Section 107 of RR No 289 held that intangible assets withdefinite lives may be subjected to depreciation allowance On the other handintangible assets with indefinite lives are not proper subject of such allowance

Under the Tax system if the impaired asset is sold the amount taxable isthe excess of the selling price and the book value (acquisition cost less accumulateddepreciation)90 Book value is used as basis for determining the value of the assetand not the carrying amount because for income tax purposes the impairment lossof the asset was not recognized The term carrying amount is used when thevalue of the asset in the books is reduced by the impairment loss adjustmentsCorollarily if the impairment loss is reversed in the books of the taxpayer theresulting profit or loss is not considered as income91

Nannd immtary lases Under the lAS the amount of any write-down ofinventory to net realizable value92 and all losses of inventory shall be recognized asan expense in the period the write-down or loss occurred93

86Jd87 TAX CoDE sect 34 (D) supra note 7688 August 27 200489 RR No 2 sect 107 supra note 23 It reads

Intangibles the use of which in the trade or business is definitelylimited in duration may be the subject of a depreciation allowance Examples arepatents copyrights and franchises Intangibles the use of which in the business ortrade is not so limited will not usually be a proper subject of such an allowance Ifhowever an intangible asset acquired through capital outlay is known fromexperience to be of value in the business for only a limited period the length ofwhich can be estimated from experience with reasonable certainty such intangibleasset may be the subject of a depreciation allowance provided the facts are fullyshown in the return or prior thereto to the satisfaction of the Commissioner ofInternal Revenue

90 BIRRuling DA-403-2003 supra note 8691 Gtytrustinvestment Phils Inc vs OR eTA Case No 4443]anuary 18199492 Deloitte Touche Tohrnatsu IAS 2 amiJdie at httpwwwiaspluscomlstandardias2htm IAS 2

defines Net Realizable Vallie as NRV is the estimated selling price in the ordinary course of business lessthe estimated cost of completion and the estimated costs necessary to make the sale

9 Id

On the other hand under the tax system the BIR looks into the reason ofthe write down In a Memorandum for the BIR Commissioner dated November21 1996 the Commissioner allowed the write-down since the inventory lossoccurred form the normal business operation of the taxpayer and not from write-off as alleged94 In fact it was due to obsolescence losses or destruction orshortages found in physical count The basis for allowing the deduction is Section34 (D) of the Tax Code which provides that the loss is deductible if it occurred inthe normal operation of the taxpayers trade profession or business As anadditional requirement however the write-off of inventories must be accompaniedby BIR certificate of destruction

CiJsOOrerKl and abl1xorlJ1Xl1t if Property Plant and E quipmnL Under the lASan asset should be removed from the balance sheet when it is withdrawn from useand no future economic benefits are expected from its disposal 95

Under the tax system losses due to obsolescence and abandonment lossesare both deductible for tax purposes The general rule is that losses eutually sustainaiduring the taxable year and not compensated for by insurance or other from ofindemnity shall be allowed as deductions for tax purposes96

Depreciation is the reasonable allowance for the exhaustion wear and tear(including reasonabfe allowance for obsolescence) of property used in the trade orbusiness97 Under the IAS98 the depreciable amount (cost less prior depreciationimpairment and residual value) should be allocated on a systematic basis over theassets useful life Under the Tax Code99 the taxpayer is given enough leeway indetermining the depreciable amount The taxpayer may compute it underestablished accounting methods such as (1) straight-line method (2) declining-balance method (3) the sum-of-the-years-digit method and (d) any other methodwhich may be prescribed by the Secretary of Finance upon recommendation of theCommissioner

Basis if Valuation Under the lAS the depreciable amount includes theimpairment loss But under the Tax System the prevailing doctrine is impairmentlosses unless covered by Section 34 (D) of the Tax Code should not be recognizedAccording to early jurisprudence depreciation must be computed based onacquisition cost and not the reappraised value of the asset1OO This is because the

94 November 2119969 Deloine Touche Tolunatsu IAS 16 awilaldeat hnp wwwiaspluscomlstandardiasI6htm

96 TAX CoDE sect 34 (0) supn note 7697 TAX CoDE sect 34 (F)98 Deloine Touche Tolunatsu IAS 16 supm note 98

99 TAX CoDE sect 34 (F)100 Basilan Estates Inc vs OR 21 SCRA 23 (1967)

idea of profit on the investment made has never been the underlying reason for theallowance of a deduction for depreciation Subsequently the BIR issued RevenueAudit Memorandum Order (hereafter RAMO) No 1-00101 and ruled that nodepreciation is allowable on the appraisal increase of fixed assets This is but logicalSince the increase in the book value of the property is not recognized for taxpurposes it follows that depreciation must not be computed on the basis of theappraised value

This notwithstanding in a recent BIR ruling a company was allowed touse the appraisal fair market value of its property plant and equipment (PPE) 102

This was confirmed by BIR Ruling DA-436-2004103 To resolve this seemingcontradiction reference to referring to BIR Ruling No 029-1998104 may be mstructlve

As a general rule in this jurisdiction mere increase in the value of propertywithout actual realization either through sale or other disposition is not taxablethe only exception being that even without sale or other disposition if by reasonof appraisal the cost basis of property is increased and the resultant basis is used asthe new tax base for purposes of computing the allowable depreciation expense thenet difference between the original cost basis and new basis due to appraisal istaxable under the economic- benefit principle (Emphasis supplied)

With this ruling it is clear that depreciation could be computed based onappraisal value provided that the net difference between the original cost basis andthe new appraised basis is taxed Note however that this doctrine was establishedonly in a BIR ruling More importantly RAMO 1-00 which explicitly provided thatno depreciation is allowable on the appraisal increase of fixed assets was issuedsubsequent to this BIR ruling Still despite this RAMO BIR Ruling DA-413-2004allowed the use the appraisal fair market value of its property plant and equipment

Under IAS 38 expenditure on research shall be recognized as an expensewhen incurred105

Under the Tax Code a taxpayer may treat research or developmentexpenditures which are paid or incurred by him during the taxable year inconnection with his trade business or profession as ordinary and necessaryexpenses which are not chargeable to capital account106 Alternatively some types

01 March 17 2000102 BIR Ruling DA-413-2004 July 302004

103 August 122004IIHMarch 19 1998(Delaine Touche Tohmatsu IAS 38 supra note 6310ltgt TAX CoDE sect 34 (I)

of research and development expenditures may be capitalized and treated asdeferred expenses107 These include expenses (1) paid or incurred by the taxpayerin connection with his trade business or profession (2) not treated as expense and(3) chargeable to capital account but not chargeable to property of a characterwhich is subject to depreciation or depletion These deferred expenses are ratablydistributed over a period of not less than sixty (60) months as may be elected by thetaxpayer (beginning with the month in which the taxpayer first realizes benefitsfrom such expenditures)

In a telephone inquiry with Ms Josephine B Trillana Chief of thePlanning and Coordination Branch of National Tax Resource Center (hereafterNTRC) the researchers were informed that the NTRC has not undertaken anystudy on the effectsmiddot of the new IAS on Philippine income tax The NTRC is anattached agency of the Department of Finance and is the primary tax researchinstitution of the Philippine government One of its commitments is tcrecommend necessary improvements in the tax system by conducting continuingquality research on taxation and to provide responsive staff support to fiscal policymakers lOB It has initiated a number of studies on taxation but unfortunately noresearch has been made on the effect of IAS on Philippine Income Tax or on thetax-accbunting disparity

The current response ~f the BIR is to issue rulings on lAS-related matterson a case to case basis Looking at the said rulings it is evident that the BIR takesinto consideration the accounting treatment of a particular transaction as well as taxprinciples

In BIR Ruling No 004-06 dated February 28 2006 issued to V CMamalateo and Associates the issue was involved was whether the refundreceivables of Meralco customers are form part of the taxable income of Meralco jpthe year the instruction to offset is given by the customers either through the fixed-credit-to-bill with option to cash payment scheme or post-dated check scheme(PDq which are modes of refund authorized by the Energy RegulatoryCommission

In this Ruling the BIR held that Meralco follows the accounting methodfor reporting income and expenses in accordance with the International Financial

107d108d

Reporting Standards (IFRS) or International Accounting Standards (IAS) so that itsfinancial statements could be said to be prepared in accordance with generallyaccepted accounting principles The BIR then cited Section 43 of the Tax Code Inaddition the BIR also discussed the realization principle (an accounting principle)and noted that the refundable amounts are Meralcos liabilities and not part oftaxable income

In this Ruling the BIR followed accounting treatment for tax putposesBut this is only because it just so happened that tax treatment coincides with theaccounting treatment Even if the all-events test (a tax principle) is applied theresult would still be the same ie there is no economic performance yet as of thedate of the instruction to offset hence it is properly not includible yet in taxablemcome

The current response of the courts is the same In the Court of TaxAppeals (CfA) Case No 6314 dated March 172006 entitled Taian (Subic) ElectricInc vs Commissioner of Internal Revenue one of the issues was whetherunrealized foreign exchange gain was taxable The Court held that while forfinancial accounting purposes foreign currency accounts (eg receivables liabilitiesand deposits) are periodically restated at the rate of exchange prevailing at year-endany foreign gainiO-osses) arising from this restatement shall be taxable or deductibleonly in the year of collection payment or actual conversion into pesos as the casemay be Thus tax treatment was followed here instead of accounting treatmentwith the resulting difference treated as a reconciling item

dearly both the BIR and the Courts could only work within theparameters set by the current laws and regulations The current framework is toreconcile the differences between accounting and tax treatment In other countrieseither tax treatment follows accounting treatment tax treatment is entirely differentfrom accounting treatment or a variation of these two As to whether thePhilippines will continue following its current policy or follow the methods adoptedby other countries it appears that there is no study being undertaken on how todeal with IAS The Philippines is following the safest route ie maintaining thestatus quo

B EFFICACY AND SHORTCOMINGS OF THE METHODS CuRRENTLYEMPLOYED

The Tax Code laid down the general rule in Section 43 that the taxableincome shall be computed in accordance with the method of accounting regularlyemployed in keeping the books of such taxpayer In reality the taxable income isnot really computed this way since there are specific tax treatments for certaincomponents of income and expenses which are different from accountingtreatment The differences that arise due to these differing treatments are treated asreconciling items Save for the Income Tax Regulations (Revenue Regulations No2) issued in 1940 there is no single regulation which provides for the proper

computation of taxable income considering the components of gross income anddeductible expense And now with the advent of the IAS and the changes in themethod of accounting employed by the taxpayer following Section 43 of the TaxCode and the maintenance of the status quo as to the tax treatment of certain itemsreconciling items have as expected increased considerably

Though the BIR issues rulings in response to queries of taxpayers saidrulings apply only to the particular taxpayer requesting for the ruling Thus at theend of each ruling is the customary paragraph This ruling is being issued on thebasis of the foregoing facts as represented However if upon investigation it will bedisclosed that the facts are different then this ruling shall be considered null andvoid While some issues experienced by a certain taxpayer may be similar to thatexperienced by another it is difficult to find a situation which is on all fours with aprevious BIR ruling The problem with this setup is that the BIR has no definedposition on the effects of IAS on the income tax computation lAS-related mattersare ruled on on a case-to-case basis In effect only those with resources to secure aBIR ruling can be sure that their tax treatment is correct Those who could notafford a ruling (which is majority of the taxpayers) are not sure of what they aredoing

Admittedly even accountants are struggling to learn the new lAS more soits effects on income tax The different accounting and auditing firms have takenthe lead by studying the IAS and by pointing out at the same time the differencesbetween the IAS and tax treatment With no revenue regulation codifying thedifferences between accounting and tax treatment taxpayers and even accountantsand revenue examiners are in the dark as to the proper treatment of the saiddifferences How can we expect tax compliance with this kind of setting

Further audit procedures to be observed by revenue officers in theconduct of audit of tax cases and in their submission of reports of investigation aresupposed to be contained in RAMOs but there is no such RAMO on how to auditincome tax returns taking into consideration the IAS If there is anyone whoshould pave the way for understanding the effects of IAS on income taxcomputation it should be the BIR True accounting firms have come up with theirown analyses of the said effects109110 but until such time that these analyses areadopted as correct by the BIR they remain as just that analyses

109 Ruben R Rubio IFRS U Tax Aaumt~ t1711i1aJie athttpwwwpicpacompharticlesIFRSvsT AXJ- 2C-06pdf

110 Isla Lipana amp Co PriceWaterhouseCoopers Tax Irrplicatims ifNewACI1XlI1tinStarr1ards t1711i1aJieathttpwwwpicpacompharticlesTAX20IMPUCA 110N200F20IFRSpdf

IAS is a world-wide phenomena and many nations are coping with thechanges brought about by the IAS The United States the basis of Philippinerevenue code has its own accounting standards the United States GenerallyAccepted Accounting Principles (US GAAP) which is different and separate fromlAS but even the US is slowly moving towards the unification of US GAAP withIAS We cannot simply adopt what they are doing though because PhilippineGenerally Accepted Accounting Principles (Philippine GAAP) is different from USGAAP Europe on the other hand the originator and proponent of lAS is alsounifying the different European nations It has introduced a single currency tomembers of the European Union and is further taking steps to unify its (thecontinents) accounting and tax systems A comparison of how the United StatesGermany and the United Kingdom are currently responding to the issue onwhether to follow IAS treatment for tax purposes is discussed below as discussedby Wolfgang Schon in his article entitled The David R Tillinghast Lecture - TheOdd Couple A Common Future for Financial and Tax Accountinglll

Under the US rule taxable income shall be computed under the methodof accounting on the basis of which the taxpayer regularly computes his income inkeeping his books 1bis is exactly the same as Section 43 of the Philippine TaxCode

The US Supreme Court in the landmark case Thor Pmeer Tad Canpany uCommissioner if Intemd Re-rerrut112 ruled that the goals of financial accounting and taxare so divergent that they should be treated differently as well The pertinentportion of the said decision is as follows

xxx the presumption petitioner postulates is insupportable in lightof the vastly different objectives that financial and tax accounting have Theprimary goal of fInancial accounting is to provide useful information tomanagement shareholders creditors and others properly interestedthe major responsibility of the accountant is to protect these partiesfrom being misled The primary goal of the income tax system incontrast is the equitable collection of revenue the major responsibilityof the Internal Revenue Service is to protect the public fIsc Consistentlywith its goals and responsibilities financial accounting has as its foundationthe principle of conservatism with its corollary that possible errors inmeasurement [should] be in the direction of understatement rather thanoverstatement of net income and net assets In view of the Treasurysmarkedly different goals and responsibilities understatement of income is notdestined to be its guiding light Given this diversity even contrariety of

III TAXLAWREVIEWWmter 2005New York UniversitySchool of Law112 439 US 52299 SQ 773 58 LEd2d 785 43 AFTR2d 79middot362 79-1 USTC P 9139 1979-1CB

167Supreme OJun of the United StatesarguedNovember 1 1978and decided on January 16 1979

objectives any presumptive equivalency between tax and financialaccounting would be unacceptable

Financial accounting in short is hospitable to estimatesprobabilities and reasonable certainties the tax law with its mandate topreserve the revenue can give no quarter to uncertainty This is as it shouldbe Reasonable estimates may be useful even essential in giving shareholdersand creditors an accurate picture of a firms overall financial health but theaccountants conservatism cannot bind the Commissioner in his efforts tocollect taxes

Finally a presumptive equivalency between tax and financialaccounting would create insurmountable difficulties of tax administrationAccountants long have recognized that generally accepted accountingprinciples are far from being a canonical set of rules that will ensureidentical accounting treatment of identical transactions Generally acceptedaccounting principles rather tolerate a range of reasonable treatmentsleaving the choice among alternatives to management Such indeed isprecisely the case here Variances of this sort may be tolerable in financialreporting but they are questionable in a tax system designed to ensure as faras possible that similarly situated taxpayers pay the same tax Ifmanagements election among acceptable options were dispositive for taxpurposes a flnn indeed could decide unilaterally-within limits dictated onlyby its accountants--the tax it wished to pay Such unilateral decisions wouldnot just make the Code inequitable they would make it unenforceable(Emphasis suppliel)

In spite of such pronouncement the United States is now moving towardsa closer alignment of book and tax profits 113 1bis appears to have been caused bythe uproar over corporate tax shelters which climaxed in the tax issues raised by theEnron debacle 114

Many employees lost both their jobs and much of their life savings in thewake of the Enron collapse x x x When Enron appeared to be profitable itwas paying little or no corporate income tax Yet the spectacle of apparentlyprofitable companies paying virtually no corporate tax has become socommon that no one considers lack of taxable profit a sign of a failingcompany Enron deducted stock option spreads from taxable income but notfrom profits reported to stockholders The company also set up hundreds of

II) Wolfgang Schon TheDaUd R Tillinjjwt LlaquoWe - TheOid OxtpleA Cmmn Futurefar FimrxiaJ arrlTaxA cml1ltiT7t Tax LawReviewWmter2005New York UniversitySchoolof Law

114 Jane G Gravelle The E rum DehJde Lessa1i far Tax Pdify The Urban Institute tr1JlilaJie athttptaxpolic~enterorgUploadedPDF310622 _Enronpdt Miss Gravelle is senior specialist ineconomic policyat the CongressionalResearchServiceof the Lbrary of Congress

offshore partnerships that it classified as debt when computing corporate incometaxes and equity when reporting to stockholders-exactly the outcomes mostbeneficial for a company attempting to conceal financial trouble (E rrphasis suppliExlj

The Enron case is an example of a system where tax and accounting areallowed to work independently but simultaneously and without precise guidelineson how to treat taxable income Whereas the Thor Power Tool casellS (discussedearlier) recognized the divergent goals of financial accounting and hence held thattax and accounting should be treated differently the Enron case showcased thedisastrous effect of such a separate treatment of tax and accounting Enron tookadvantage of the best of both worlds - tax and accounting - and made combinedmethods from both which are best advantageous to the company In this mannerEnron was concealing its real financial status making it appear in its books andfinancial statements that it was profitable Its sudden collapse however provedotherwise Thus based on US experience the wide gap between accounting andtax proved to be detrimental

In Germany income tax is computed on the basis of the profit and lossstatement shown in the financial statementsll6

The consequences resulting from this principle are twofold Firstthe amount of tax to be paid is calculated on the basis of the figurespublished in the financial statements Consequently the profit reponed inthe published accounts of a German company usually does not differsignificantly from those in the tax accounts This has the result thatcompanies are forced to evaluate their assets at the lowest amountpossible whereas their liabilities have to be valued at their highestamount possible in their commercial financial statements in order tominimize their tax liability Secondly most of the tax incentives can beclaimed only if the same treatment is applied to the items in question in thecommercial fmancial statements The latter consequence is referred to as theso-called umgekehrtes Ma geblichkeitsprinzip (principle of reverseauthoritativeness or principle of converse congruency) According to thisprinciple options prescribed by tax law may only be exercised in conformitywith the commercial financial statements (financial conformity) This meansthat the tax law has a direct impact on financial accounting andfmancial statements are dependent upon tax accounts The principle ofconverse congruency is a logical consequence of the aim of the taxauthorities to achieve a consistent and close relationship between tax and

1I 439 US 522 995077358 LEd2d 785 43 AFTR2d 79-36279-1 USTCP 91391979-1 CB167 Supreme Ggturt of the United States argued November 11978 and decided on January 161979

1I6ld

conunercial income computation 117 (Iruemal citations ani1tlaquo1) (EmphasisSlIpplialj

Under financial accounting the goal is to highlight the profitability of thetaxpayer in order to attract investors and increase customer loyalty on account ofthe perceived financial stability of the company On the other hand in computingfor taxable income from the point of view of the taxpayer the goal is to reduce taxthrough legal means In the case of Germany it has to balance these two opposingends

Recently there is a move in Germany to abolish the principle ofdependence of tax on accounting altogether The German Ministry of Financecommissioned a study on the impact of IAS on German tax accounting In thisstudy published in 2004 Norbert Herzig a Cologne tax professor pushed forautonomous rules on income measurement strictly for tax purposes His reasonsfor which being1l8

bull The priwte dJaraeter ifstmrlarrJ setting by the IASB It is hard to accept thatGerman tax legislation should defer to the rules and principles laid down by aLondon- based international association

bull The restridai field if application if IA S As long as these internationalstandards are binding only for listed companies they cannot form the basis for thecorporate or personal income tax which also addresses privately held companiescommercial partnerships and sole entrepreneurs

bull The inJOmutim purJX6e if aamnting stanlanls These standards are primarilymade to provide useful information to investors It allows managerial discretionwhen it comes to the assessment of an inflow or outflow of future economicbenefits This uncertainty is not compatible with tax assessments which rely on hardnumbers not subject to manipulation by the taxpayer

The German government and business community seem to support thischange For the German Ministry of Finance the codification of an autonomous setof tax accounting rules would imply greater independence from standard-settingbodies For German business the principle of dependence needs to be reassessedbecause IAS does not follow the conservative principles of traditional Germanfinancial accounting but takes a more symmetric view when it comes to therecognition of revenues and expenses119 They fear that a linkage of tax accountingto international accounting standards inevitably would lead to a higher tax payable

117 Sabine D Selbach 7be Hammizatim if CorpmtteTaxatim amp A~ StanlmJs in theEurrpmnCmmmity ani their Irterni4Jimship Connecticut Journal of International Law 2003

Il8 SchOn supm note 1611 Id

This debate in Germany is also happening in many other Europeancountries where there is a traditionally a strong linkage between financial and taxaccounting In Austria Belgium and France the abolition of book (or accounting)-tax conformity is under SCIUtiny120Switzerland has stopped its current financialaccounting reform in order to find a consensus on the tax consequences of a broadapplication of IAS in the Swiss corporate sector Even in Spain where book-taxconformity was enacted as late as 1996 a recently published study has opted for amove away from the principle of dependence if IASIFRS forms the basis of thisconcept

The other extreme is England where income measurement is donewithout reference to financial accountingl21 The detailed rules and principles ofBritish commercial accounting laid down in professional standards over time haveproven to be a valuable tool in solving practical problems of income taxassessments The courts have supported this too In several decisions the UKOJurts have accepted British GAAP as a cornerstone of tax accounting

Section 42 of the 1998 UK Finance Act provided explicitly that profit andloss measurement under tax law should follow the true and fair view principle inaccordance with financial accounting standards if the tax code does not sayotherwise1n With the advent of the lAS the discussion as to whether UKlegislation should continue with this position is rife In 2002 a study commissionedby the Institute for Fiscal Studies and wrinen by Graeme McDonald showed strongsympathy for aligning taxable income with accounting income123He welcomed thepositive influence of the impartial and professional judgment of financial standardseners on the confrontational relationship between the taxpayer and thegovernment After this the British government in 2003 published a consultationdocument on Reform of OJrporation Tax which expressly asked the public fortheir opinion on a closer alignment of taxable and business profits under UKlawl24 The same elicited mixed response A study by Christopher Nobes on behalfof the Association of Chartered Certified Accountants was critical of this proposalHe proposed a movement towards autonomous rules on tax accounting125 One ofhis main arguments against linkage is the fear of pollution of the independentcapital-market-oriented standard-sening process by tax policy issues

In the end the UK government decided to move forward on their waytowards book-tax co~ormity In 2004 the British Parliament enacted a provision

120Id11l Id122 Id

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which refers the measurement of business profits nnder UK income tax law to theIASIFRS

The European Union is one of the most advanced markets in the worldwith a single currency and a Common Market With the shift to lAS resulting inwllformity in acconnting only differences in tax bases and tax rates exist126 Thenext goal therefore in order to have a level playing field is to have nniformity intax bases and tax rates as well To further this objective the European Commissionopted for a tax regime where the Member States would be free to decide on thecotporate income tax rate but where multinational entetprises would be able to relyon identical rules for the computation of the tax basis all over Europe

Another topic for discussion is the concept of a common consolidatedtax base applicable to multinational business activities One practical and politicalargument against this concept is that it will lead to an accelerated competition forthe location of parent companies and will distort the competitive situation ofsubsidiaries and permanent establishments in other Member States due to the taxrules of the respective parent company

In the past there were already differences in the tax and acconntingtreatments of the items of gross income and allowable deductions With theadoption of the majority of the IAS in 2005 the number of differences is expectedto escalate The acconnting finns are doing their share towards the systematicadoption of IAS by studying the impact of adoption in the existing acconnting andtax systems and by re-training their staff and other acconntants who attend theseminars they offer on how to cope with the changes It is high time for thegovernment through the BIR to do its part After all the tax-acconnting disparityhas an effect in the computation of taxable income and consequently on taxcompliance and collection of tax the lifeblood of government

We do not need a dramatic change in the tax system in response to theadoption of the IAS Small but sure steps may be taken towards the reconciliationof tax and acconnting principles As shown in this paper there are differences in thetax and acconnting systems

For the short-term it is best to retain the status quo which is to reconcilethe differences between accounting and tax The identification of the differencesbrought about by the lAS discussed earlier help address this problem The BIRshould issue new regulations which embody all the changes to enlighten taxpayerswho are still in the dark as to what really are the effects of the new IAS on theincome tax computation It should explain in terms understandable to laytaxpayers what exactly are the differences how they came about and how toaccount for them It is best to update the Income Tax Regulations (RevenueRegulations No2) issued in 1940 to incorporate all the changes for the past 67years

Furthermore a RAMO for audit procedures to be used by tax examiners isalso necessary to ensure that examiners can ensure taxpayers compliance This willalso be helpful to taxpayers who wish to be prepared for a BIR audit

The BIB in addition to training its employees may also conduct its ownstudy on this matter possibly also in cooperation with the National Tax ResearchCenter (N1Rq

The BIR could also issue a Revenue Memorandum Orcular (or RMq forthe benefit of revenue officers to reiterate and amplify of the rules precedentslaws regulations opinions and directives issued by or administered by theCommissioner as well as by other offices and agencies Take the case of RMC 06-2005127The Supreme Court decided the case of Philippine Journalists Inc vs ORon December 16 2004 The said case laid down the requirements of a valid andbinding waiver of the statute of limitations under the Tax Code Then the BIRafter less than two months issued RMC 06-2005 for the guidance of the concernedofficer By doing the same the revenue officers themselves who are tasked toimplement the revenue code are not at a loss as to how to properly handle andsettle tax-accounting disparities

Moreover the BIR could issue other issuances such as RAMOS128 andRevenue Regulations The principles in RMC 44-2002129 and RMC 22-2004130 aretwo promising circulars but unfortunately they have not been consolidated into amore concrete rule or regulation It is about time the BIR established precedentsand regulations on how to bridge the tax-accounting disparity

127 February 2 2005128 RAG No 1-99 sect 3 supra note 17 It defines RAMOs as the audit procedures to be observed by

revenue officers in the conduct of audit of tax cases and in their submission of reports of investigation129 Supra note 36no Supra note 6

After familiarizing itself with the IAS and its impact on Philippine taxationthe government should take a bolder step In effect Section 43 of the Tax Code issaying that the taxpayer could adopt any acconnting method it wishes provided thatit clearly reflects income But then what is the Commissioners basis in saying thata certain method does not clearly reflect income Will it be on the basis ofacconnting or tax standards The battle between the two systems continues

The bolder step is to amend the Tax Code This way broad provisionssuch as Section 43 could be expanded supplying the details necessary for theguidance of the taxpayer In the case of rental Income discussed earlier BIR Ruling003-2000 took notice of Section 43 but it still prescribed the manner by whichrental income (and advance payments) should be recognized The Ruling evenemphasized that such is the rule to be followed in computing rental incomenotwithstanding the acconnting method employed by the taxpayer Amendmentsto the Tax Code could follow the same - provide a specific rule on how certainincome or expenses should be treated in computing taxable income

In the process we should also take into consideration that any change inthe tax laws will give rise to many potential problems one of which is politicalpressure Similar to what happened to Republic Act No 9337 the E-VAT it is tobe expected that many people who do not nnderstand what the law really is willjump to the conclusion that the law is bad- since it increases taxable income It willtake much political will on the part of the administration to push for it As long asthe proposed Tax Code addresses the right problem (the tax-acconnting disparity)and as long as it provides an equitable solution the change is very much welcome

As for the Philippines position on whether tax acconnting should followfinancial acconnting it is best that the government commission a study as to whichmodel conntry to follow or to continue with the status quo similar to thatcommissioner by Germany This may be the subject of future legislation Based onthe experience of other conntries as earlier discussed it appears that the bestposition would be the middle gronnd between acconnting and tax Germany whichis on one end of the extreme now realizes that it is not advisable for tax to followfinancial acconnting completely The US and the UK which is on the other end ofthe extreme now wants its tax computation to conform more closely to financialaccounting computation As to where this middle gronnd is the proposed study byPhilippine tax experts will best supply the answer

While the book-tax conformity debate is raging in other conntries we haveheard of no such debate in the Philippines It is probable that many do not see theneed for the said debate since our current treatment seems to be reasonableenough Either that or no one is really thinking about it It is high time that we atleast scrutinize our tax laws Looking at Philippine history we can see that many ofour laws including that of tax have been copied from the US simply because of ourstatus as a former colony of the US A thorough and objective analysis is called for

if only to ascertain the best tax model for the country independent of the influenceof the US The effects of this analysis is predictably far-reaching Taxes as thelifeblood of government deserves no less than an in-depth study

The IAS is a product of many years of study and debate by policymakersfrom different countries It is one of the steps taken by nations towards the ultimategoal of uniformity in business transactions all over the world The IAS is here tostay and the country has to embrace it in order to keep up with the rest of theworld In the process however the government should not neglect that theaccounting system is tied up with other aspects of the society such as tax Thoughtax and accounting systems are inherently different it does not mean that they areirreconcilable

The issue on tax-accounting disparity at first looks too insignificant sincethe taxpayer has the option to choose whatever accounting method that best suitsits needs But then we do not want to repeat the Enron experience in thePhilippines We do not want Philippine corporations to appear profitable and fallapart without warning because of cherry picking or the practice of choosing onlythe best practice from both systems

This paper was able to note a number of differences beTWeen the tax andaccounting treatment of income and ~xpense The numbers are expected to rise asthe IAS is fully integrated into our existing accounting system

We patterned if not copied our Tax Code from the US Revenue Codeand through the years we still refer to us jurisprudence for the properinterpretation of our very own revenue laws Instead of waiting at the sideline forthe US or another country to take the first move let us take a pro-active role thistime and bridge the gap between tax and accounting

tax accounting coupled with the new differences brought about by the lAS spellconfusion in the minds of taxpayers Considering the absence of clear cut taxguidelines tax compliance and consequently tax collection is in jeopardy

To show that a tax-accounting disparity actually exists this paper outlinesthe differences between accounting and tax treatment of the items of gross incomeand allowable deductions It also shows the past and current solutions put forth bythe government and its efficacy and shortcomings This paper will also show howother countries - the United States United Kingdom and Germany -- areresponding to the changes brought about by the IAS Finally this paperrecommends the following a) the introduction of short term stop-gap and longterm solutions ranging from a careful study of the lAS b) the training of taxpayersand revenue examiners c) the issuance of definitive revenue regulations to set clearguidelines on how to compute income taxes (taking the IAS into consideration) d)certain amendments to the Tax Code and e) the issuance of a definite position onthe book-tax (accounting and tax) conforrnitydebate

With the globalization of world economy and trade liberalizationinternational trade barriers are being eroded Doing business across borders is nowpossible and investors could invest their money anywhere in the globe Howeverto convince them to part with their capital the financial statements of prospectiveinvestments should be transparent reliable and comparable Previously anobjective comparison of financial statements was almost impossible with thedifferent accounting standards in place in different countries

In order to set a level playing field countries around the world includingthe Philippines have adopted the new international accotmting standards (IAS) It isenvisioned that with the adoption of the lAS we will be able to enhance thecomparability and understandability of financial statements which will in effect beable to develop the countrys global competitiveness as well as promote greaterinvestor protection4 Thus from an investors point of view the shift to IAS isclearly beneficial

However from the point of view of tax authorities the shift to IAS bringsabout many problems In the Philippines under Section 43 of the Tax Code as ageneral rule taxable income shall be computed upon the basis of the taxpayersannual accounting period (fiscal year or calendar year as the case may be) inaccordance with the method of accounting regularly employed in keeping the books

Primer on SEes Initial Adoption and Implementation of International Accounting Standards (lAS) Statement of Financial Accounting Standards (SFAS) AvaibblehttpwwwsecgovphprimerIAS20primerpdL April 3 2002 [3-4]





















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PLJ Volume 82 Number 1 -03- Myrvilen M. Alviar & Cherry Vi M. Saldua-Castillo - When Accounting...

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Transcript of PLJ Volume 82 Number 1 -03- Myrvilen M. Alviar & Cherry Vi M. Saldua-Castillo - When Accounting...