Research and development deductions and GAAP

2009 amendments have been made to allow for the fact that there are two versions of generally accepted accounting principles (GAAP) in use.

Sections DB 34, DB 35 and YA 1 of the Income Tax Act 2007; sections DB 26, DB 27 and OB 1 of the Income Tax Act 2004

Amendments have been made to allow for the fact that currently there are two version of generally accepted accounting principles (GAAP) in use, colloquially known as IFRS (International Financial Reporting Standards) GAAP and "old" GAAP.

Background

When the IFRS GAAP tax amendments were made it was not known that "old" GAAP would be retained for some time and the references to "old" GAAP were replaced with references to IFRS GAAP. Thus it has become necessary to ensure that the Income Tax Acts address deductibility for research and development in terms of both "old" GAAP and IFRS GAAP.

Key features

The core changes are in section DB 34 of the Income Tax Act 2007 (and section DB 26 of the Income Tax Act 2004). The other changes are consequential definition changes. In particular, both the old and the new GAAP reporting standards are now referred to.

Application date

The amendments apply from the date the original legislation could have applied from, generally the 2007-08 income year.