Section 371VC | Accounting profits ^F1

(1)This section and section 371VD (with which this section needs to be read) apply for the purposes of this Part.

(2)A CFC's accounting profits for an accounting period are its pre-tax profits for the period.

(3)If financial statements for the CFC are prepared for the accounting period in accordance with an acceptable accounting practice, the CFC's pre-tax profits are to be determined by reference to the amounts disclosed in those statements (subject to subsections (4) and (5)).

(4)Subsection (5) applies if—

(a)the CFC's financial statements for the accounting period (or any aspect of them) are not prepared in accordance with an acceptable accounting practice, or

(b)no financial statements are prepared at all for the CFC for the accounting period within 12 months after the end of that period.

(5)The CFC's pre-tax profits are to be determined by reference to the amounts which would have been disclosed had financial statements for the accounting period been prepared for the CFC in accordance with—

(a)the acceptable accounting practice in accordance with which financial statements for the CFC are normally prepared, or

(b)if paragraph (a) cannot be applied, international accounting standards.

(6)Each of the following is an “acceptable accounting practice”—

(a)international accounting standards,

(b)UK generally accepted accounting practice, and

(c)accounting practice which is generally accepted in the territory in which the CFC is resident for the accounting period.

(7)In this section references to amounts disclosed in financial statements include amounts comprised in amounts so disclosed.

(8)If the CFC's accounting profits (or any amounts included in them) are determined in a currency other than sterling, they are to be translated into their sterling equivalent using the average rate of exchange for the accounting period calculated from daily spot rates.