CHAPTER 3

Calculation of the qualifying income or loss

111O. Determination of qualifying income or loss

(1) Subject to subsection (2), ‘qualifying income or loss’, in respect of a fiscal year, means the financial accounting net income or loss of a constituent entity for a fiscal year, as adjusted in accordance with sections 111P, 111Q, 111R, 111S, 111W, 111AB, 111AM, 111AN, 111AQ, 111AR, 111AV and 111AW.

(2) Where it is not reasonably practicable to determine the financial accounting net income or loss, referred to in subsection (1), based on the acceptable financial accounting standard or authorised financial accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity, the financial accounting net income or loss of the constituent entity for the fiscal year may be determined using another acceptable financial accounting standard or an authorised financial accounting standard where—

(a) the financial accounts of the constituent entity are maintained based on that accounting standard,

(b) the information contained in the financial accounts is reliable, and

(c) permanent differences greater than €1,000,000 that arise from the application of a particular principle or financial accounting standard to items of income or expense or transactions, which differs from the principle or financial accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity, are adjusted to conform to the treatment required for that item or transaction under the financial accounting standard used in the preparation of the consolidated financial statements.

(3) Where the consolidated financial statements of an ultimate parent entity are prepared using financial accounting standards other than an acceptable financial accounting standard, the consolidated financial statements of the ultimate parent entity shall be adjusted to prevent any material competitive distortion for the purpose of determining qualifying income or loss.

(4) Where the application of a specific principle or procedure under a set of generally accepted accounting principles results in a material competitive distortion referred to in subsection (3), the accounting treatment of any item or transaction subject to that principle or procedure shall be adjusted to conform to the treatment required for that item or transaction under International Financial Reporting Standards.