The adoption of FRS 115 will affect the way entities recognise their revenue and hence have certain income tax implications.
FRS 115 – Revenue from Contracts with Customers is applicable to entities for their annual periods beginning on or after 1 January 2018 if there is no early adoption.
The Inland Revenue Authority of Singapore (IRAS) had previously issued a public consultation paper in October 2015 to provide guidance on their position regarding such income tax implications. On 12 January 2018, the IRAS issued a summary of the key comments received and their response, along with an e-Tax guide on the income tax treatment arising from the adoption of FRS 115.
A new section 34I of the Income Tax Act was also legislated in October 2017. It sets out the tax treatment of transitional gains or losses recognised upon adoption of FRS 115. It provides for the tax treatment of the transitional gains or losses in the year of assessment relating to the year in which FRS 115 is first adopted (initial YA) based on the tax rates applicable to the entity for the initial YA.
