Analysis Of Differences In Tax Treatment Of Borrowing Costs

The cost of borrowing has always been a means for some enterprises to regulate profits. In order to standardize the accounting behavior of enterprises, in February 2006, the Ministry of Finance revised the accounting standards for Enterprises No. seventeenth - borrowing costs, the new enterprise income tax law and the notice on tax policies concerning the pre tax deduction standards of interest rates for interested parties of enterprises.

[2008] No. 121 and the notice on the implementation of the enterprise accounting standards concerning enterprise income tax policy (fiscal 80 [2007]) also made new provisions for the pre tax deduction of borrowing costs. This article will make a comparative analysis with the case.

Major changes in the new guidelines:

1. the asset scope of borrowing cost capitalization has expanded.

The borrowing cost of "stocks and investment real estate" that need to be purchased or built for a considerable period of time to reach the state of availability or sale can be converted to capitalization before meeting the three conditions of capitalization.

2. the scope of loans granted to capitalization has been widened.

In addition to special loans, assets for general borrowing are purchased or built to meet capitalization conditions, and the general borrowing cost can be capitalized when the accumulated expenditure exceeds the specific loan.

3. the amortization of the premium or discount of the loan is changed, that is, the real interest rate method can only be amortized.

Case: Yaguang company started construction workshop in January 1, 2008. It is expected to be completed in December 31, 2010, occupying a special loan and two general loans. The related economic activities are as follows:

1.2008 years in January 1st, special loans were obtained, the principal amount was 400 million yuan, the interest rate was 9%, 3 years, and the interest was paid at the end of each year.

In November 1, 2007, the average borrowings were 286 million yuan, the interest rate was 6%, 3 years, and the interest rate was paid at the end of each year.

In December 1, 2007, the average borrowings were 250 million yuan, the interest rate was 8%, 5 years, and the interest rate was paid at the end of each year.

In January 1st 2.2008, the cost and value added tax of the purchase of engineering materials amounted to 200 million yuan.

In February 1st, the salaries of construction workers were paid 31 million 500 thousand yuan.

In March 1st, the products produced by the enterprise were used in the construction workshop. The cost of the product was 260 million yuan, of which the material cost was 150 million yuan, and the value added tax input tax was 25 million 500 thousand yuan when the material was first purchased. The product tax value was 500 million yuan, and the value-added tax rate was 31 days for 17%.3 months.

Suppose that the company calculates the amount of interest payable on capitalization on a monthly basis, which is calculated on a daily basis of 30 days and is calculated on a 360 day basis.

Idle special loans are used for short-term investments in fixed income bonds, assuming that the short-term investment return rate is 6%. The amount of interest capitalization and the amount of expenses payable in January 2007, February and March will be calculated, and the relevant accounting treatment will be made (10000 yuan).

Analysis:

Special loans in January 1.2007, payable interest =40000 x 9% 12=300 (10000 yuan), short-term investment income = (40000-20000) 6% 6% 12=100 (10000 yuan), capitalization amount of =300-100=200 (10000 yuan).

In January 2008, the general borrowing cost was =28600 x 6% x 12+25000 x 8% 12=309.67 (10000 yuan).

Accounting entry:

Borrow: in construction 200

Bank deposits (or accounts receivable) 100

Financial cost 309.67

Loan: interest payable 609.67.

Special loans for 2.2007 years in February, payable interest =40000 x 9% 12=300 (10000 yuan), short-term investment income = (40000-20000-3150) x 6% 12=84.25 (10000 yuan), capitalization amount =300-84.25=215.75 (10000 yuan).

In February 2007, the general borrowing cost was =28600 x 6% x 12+25000 x 8% 12=309.67 (10000 yuan).

Accounting entry:

Borrow: in construction 215.75

Bank deposits (or accounts receivable) 84.25

Financial cost 309.67

Loan: interest payable 609.67.

Special loans for 3.2007 years in March, payable interest =40000 x 9% 12=300 (10000 yuan), capitalization amount =40000 x 9% 12=300 (10000 yuan).

In March 2007, the capitalization amount of general loans should be limited to the total assets expenditure that exceeds the assets of the special borrowings. In March 1st, capital expenditure =26000+2550=28550 (10000 yuan), March 31st capital expenditure =5950 10000 yuan, and the weighted average of capital expenditure exceeding the amount of specialized loans is (20000+3150+28550-40000) x 30 x 30+5950 x 0 30=11700 (10000 yuan).

The general loan should be capitalized interest rate = (28600 x 6%+25000 * 8%) 28600+25000 (=6.93%), the general loan should be capitalized amount =11700 * 6.93% (12=67.58) (10000 yuan), payable interest =28600 * 6% 12+25000 12+25000 8% 12=309.67 12=309.67 (10000 yuan), the amount of expenditure =309.67-67.58=242.09 (10000 yuan), capitalization total =300+67.58=367.58 (10000 yuan).

Accounting entry;

Borrow: in construction 367.58

Financial cost 242.09

Loan: interest payable 609.67

Tips:

1. general borrowings

The calculation step of the amount is to calculate the weighted average capitalization rate first, and then calculate the weighted average of the cumulative expenditure.

2. the difficulty of general borrowing is to calculate the weighted average of accumulated expenditure.

The so-called weighted average is the proportion of the occupied capital occupied by the project during the capitalization period.

For the portion that has already been paid, the stock weight is 1. If it is part of the current expenditure, the weight must be determined on the basis of the actual period occupied by the expenditure.

For example, if an expenditure is paid at the beginning of the year, then the weighted average expenditure weight of the expenditure is =12 12. If the expenditure is paid in early March, the weighted average expenditure weight of the expenditure is =10 12.

3. the capitalization interest expense of general loans can not deduct interest income from idle funds.

Since it is a general loan, the unoccupied part has nothing to do with the construction project, so the interest income from idle funds can only reduce the financial cost of the enterprise in the current period, which is the main difference between general loans and specialized loans.

Fiscal differences: Based on the implementation of the enterprise accounting standards.

The notice on policy issues (fiscal 2007 [80]) is consistent with the following aspects in respect of the new standard and the tax law: 1. the fiscal and tax requirements are consistent under the real interest rate law. The 80 document stipulates that the interest expense related to financial liabilities recognized by the effective interest rate method shall be deducted according to the conditions of the current tax regulations, and not exceeding the bank loan interest rate of the same period.

That is, the new guidelines and the new tax law are basically in harmony with the bonds payable under the real interest rate law, and no longer have fiscal differences.

2. the requirement of capitalization of loan cost is consistent.

The thirty-fourth provision of the pre tax deduction method for enterprise income tax stipulates that the borrowing costs incurred during the purchase and construction of related assets for the purchase, construction and production of fixed assets and intangible assets shall be included in the cost of the assets concerned as capital expenditures.

The borrowing cost incurred after the assets are delivered and used can be deducted in the current period.

That is, the time of tax law to stop capitalization of borrowing costs is defined as "when assets are delivered and used".

The "accounting standards for Enterprises No. seventeenth - borrowing costs" criterion determines that the time to stop capitalization is "when the assets are in a predetermined position to be used or marketable".

The above 80 document is consistent with the differences between the two, that is, the relevant provisions of accounting standards should be referred to in the tax law, but the provision for depreciation is still based on the tax law.