The consultant´s journey

Bringing Theory to Practice - By books, articles, research and lectures

Month: June 2017

New Accounting Standard for Housing Associations

housing associations BRF bostadsrättsförening bostadsrätt tenant-owned apartment tenant ownership

A Swedish governmental investigation proposes a new standard for financial statements for housing associations. I have written an article in Swedish about it here Bostadsrättsföreningar får nya redovisningsregler.

A draft has been sent for comments until October 1, 2017. The changes are to be in force for fiscal years starting January 1, 2019 and later, according to the draft.




 

Today’s Standards Not Suitable for Housing Associations

In Sweden housing associations is a very common form of living. The association owns the building and supplies the members with tenant-owned apartments. The ownership is transferred by selling and buying member shares in the association.

Since a membership share can be quite pricey, at least in prime locations, the investigations has focused on improving the financial information that is provided by the housing associations in their financial statements.

In Sweden we have two general standards for financial statements, K2 for smaller entities and K3 for larger entities and groups. There is no specific standard for housing associations.

The draft includes many changes in several areas, but in the accounting areas the main changes are these.

  • Mandatory component depreciation
    • Affects the income statement more even, when major maintenance is accounted for as changes of components rather than large expenses at once
    • Today component depreciation is prohibited in K2 but mandatory for larger entities and groups applying K3
  • Mandatory cash flow statement
    • Today a cash flow statement is voluntary in K2 but mandatory for larger entities and groups applying K3
  • Mandatory additional financial ratios applicable for housing associations, such as
    • Annual fee/square meter
    • Depreciation and maintenance deposition/square meter
    • Debts/square meter
    • Interest sensitivity
    • Energy expenses/square meter

The changes are proposed for all housing associations, regardless of their sizes.

The draft doesn’t include detailed regulations for the financial statements, but proposes that the governmental body The Swedish Accounting Standards Board (Bokföringsnämnden, BFN) shall produce a new standard for financial statements of housing associations.

 

My Books

My book “Performance and Income Planning” (Resultat- och inkomstplanering) from 2015 relate to housing associations in two sections.

  • Corporate: Evaluate the depreciation plans and methods regularly in your performance planning, especially housing associations have frequently made bad assumptions historically (chapter 3.1 Balance Sheet, page 34-36)
  • Private: Choose your housing association wisely, so you’ll get a low cost living with high quality as a part of your income planning and retirement planning (chapter 5.5 Overall Issues, page 155-156)

My book “Real Estates” (Fastigheter) from 2016 relate to housing associations in numerous sections, but particularly here.

  • Corporate: Component depreciation is described, discussed and mentioned as a preferred alternative, with a high number of examples and references (chapter 4 “Depreciation”, section 4.1.3 ”Component depreciation”, page 135-145)

Lectures / Föreläsningar

Keep yourself updated by education! I give lectures on legislation and standards for accounting, as well as other economic topics.

Håll dig uppdaterad genom att gå på kurs! Jag håller föreläsningar om lagstiftning och K-regler för redovisning, liksom om andra företagsekonomiska ämnen.

  1. Choose lecture / Välj föreläsning (Publications & Lectures)
  2. Book / Boka (Contact)
  3. And-or buy the books! / Och-eller köp böckerna! (Publications & Lectures)

Comment and follow

Do you have opinions on this post?
You’re welcome to comment my blog below
and please feel free to sign up as a follower

Resultat- och inkomstplanering Fastigheter Bulletinen Svensk Skattetidning SvSkt Pågående arbeten Tantiem

Method: Bringing Theory to Practice
Results: Publications and Lectures
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Limited Interest Deductions for Companies

100,000 SEK 100 000 kr ränteavdrag företagsskattekommittén

100,000 SEK, that will be the maximum annual deduction for a negativ interest net according to a simplified alternative if a new draft leads to legislation.

The draft consists of many tax changes. I have written about it in Swedish at the web page of RedovisningsHuset i Södertälje AB, Ränteavdrag slopas för företag – nästan.

The main object is to prohibit tax planning with deduction of interests, above all internationally.

Deductions for interests are not totally stopped, but the limitations will make it feel like at stop for companies with high debts and low earnings.




 

Schedule

The draft was sent for comments on June 20, 2017. Comments can be made until September 26, 2017. The plan is to have the new regulations in force for fiscal years beginning July 1, 2018 and later.

 

Several Limitations for Deductions of Interests

The object of the limitations is the net interest, calculated as interest incomes reduced with interest expenses. A positive net is fully taxable, but a negative net will only be deductible within the new limitations.

The Swedish government have asked for opinions on which deduction base to choose, EBIT or EBITDA, for calculation of the deduction of net interest.

  1. Main option: Up to 35 % of EBIT (Earnings Before Interest and Tax)
  2. Alternative option: Up to 25 % of EBITDA (Earnings Before Interest and Tax, Depreciation and Amortization)

Only one of the options will be included in the legislation.

As a simplified alternative, a company may chose to deduct up to 100,000 SEK for a negative interest net. In this alternative it’s not necessary to calculate the EBIT or EBITDA.

For company groups the limits shall be calculated as a total for all the companies in the group. That applies to all alternatives, EBIT, EBITDA and 100,000 SEK limit. The argument is to stop planning by dividing a company with a high negative interest net into several companies, to increase the total deductions.

An exceeding negative interest net can be saved for future deductions up to six years.

 

Reduced Corporate Income Tax

To compensate the companies for tax consequences of the new limits, the corporate tax is to be reduced from today’s 22 % to 20 %.

 

No Hybrid Mismatches

International tax planning with interests, between countries with different tax regulations, are to be stopped by totally stopping interest deductions in those cases.

 

No Interest Included in Assets

Companies can, if they want to, include interest related to investments that takes long time to complete, thus increasing the accounted value of the asset and accordingly decreasing the interest expenses.

In the draft the government proposes to stop this accounting possibility, to ensure that the deduction limits of negative interest rates are not evaded.

 

Tax Regulations for Leasing

Sweden doesn’t have any specific tax regulations for leasing, but in the draft such regulations are proposed. The purpose is to stop tax planning by eliminating negative interest nets with loans changing to leasing.

All financial leasing agreements shall be accounted for as if the company have bought the asset. This way the leasing fees are to be divided in amortization and interest.

Today only larger companies have to account like this, and then only in the consolidated accounts. The draft will lead to that larger companies have to account in the same way in the juristic person. Accounting regulations for smaller companies prohibit this way of accounting to day, but in the draft the government simply leaves that problem to the standard setting body The Swedish Accounting Standards Board (Bokföringsnämnden, BFN) to solve.

My comment: These regulations might, if they lead to legislation, have to be amended already within a few years since the new standard on leasing from IASB isn’t considered. In that new standard all leasing agreements will have to be accounted for as if they are financial leasing agreements, also the operational leasing agreements.

 

Untaxed Reserves Gets More Expensive

Swedish companies have a possibility to partially save earnings taxfree in reserves, but have to pay a standard tax as an interest on these reserves (”Periodiseringsfonder”). The draft proposes a raise of the standard tax to follow the new limitations of interest deductions.

 

Raised Depreciation for New Apartment Building

Real estate companies can face big problems with the new limitations of interest deductions, since they usually have high negative interest nets compared to their earnings.

The government is especially concerned of not disturbing the speed of building new houses for living, since Sweden is experiencing a great lack of housings. Therefor the draft includes a new ”primary deduction” for tenant buildings of 2 % annually the first five years after completion.

Normally 2 % per year can be deducted for an apartment building, meaning 50 years of depreciation time. With the primary deduction totally 4 % can be deducted per year in the beginning but after five years we’re back to the normal 2 % anually again, meaning 45 years of depreciation time.

 

Limited Carry Forward of Losses

Sweden have a system of carry forward losses. One years loss is deductible upcoming years, without limitation in time. The draft proposes that for two or three years after legislation only 50 % of saved losses will be deductible. The purpose of this temporary limitation is to help financing the reduced income tax, the primary deduction for new housings and more.

 

My Books

In my book ”Performance and Income Planning” (Resultat- och inkomstplanering) from 2015 I described these possible future changes in chapter 7.3 ”Company taxation committee” (Företagsskattekommittén), page 188-193, so I hope my readers are well prepared!

In my book ”Real Estates” (Fastigheter) from 2016 the possible changes of depreciation for new tenant buildings are of interest for chapter 4 ”Depreciation” (Avskrivningar).


Lectures / Föreläsningar

Keep yourself updated by education! I give lectures on legislation and standards for accounting, as well as other economic topics.

Håll dig uppdaterad genom att gå på kurs! Jag håller föreläsningar om lagstiftning och K-regler för redovisning, liksom om andra företagsekonomiska ämnen.

  1. Choose lecture / Välj föreläsning (Publications & Lectures)
  2. Book / Boka (Contact)
  3. And-or buy the books! / Och-eller köp böckerna! (Publications & Lectures)

Comment and follow

Do you have opinions on this post?
You’re welcome to comment my blog below
and please feel free to sign up as a follower

Resultat- och inkomstplanering Fastigheter Bulletinen Svensk Skattetidning SvSkt Pågående arbeten Tantiem

Method: Bringing Theory to Practice
Results: Publications and Lectures
Stay informed: Newsletter

Subscribe to Blog by Email

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Agreement with Accountor on Lectures

Accountor Training in Sweden has signed an agreement with me on lectures. Initially I’m delivering 12 webinars in September 2017 on accounting related topics, from their studio in Stockholm.

Quoting their web pages Accountor in Sweden is part of Accountor Group, one of the leading players in Northern Europe in outsourcing services and financial management, as well as accounting and human resources management for small and medium-sized enterprises.

Accountor has over over 2,300 employees at 100 offices in 7 countries.

  • Finland
  • Sweden
  • Denmark
  • Norway
  • The Netherlands
  • Ukraine
  • Russia

The head office is located in Helsinki, Finland.

Accountor Training is established in several countries and is now also starting up in Sweden.

I’m proud to be part of Accountor Training services and welcomes them among my customers!





Lectures / Föreläsningar

Keep yourself updated by education! I give lectures on legislation and standards for accounting, as well as other economic topics.

Håll dig uppdaterad genom att gå på kurs! Jag håller föreläsningar om lagstiftning och K-regler för redovisning, liksom om andra företagsekonomiska ämnen.

  1. Choose lecture / Välj föreläsning (Publications & Lectures)
  2. Book / Boka (Contact)
  3. And-or buy the books! / Och-eller köp böckerna! (Publications & Lectures)

Comment and follow

Do you have opinions on this post?
You’re welcome to comment my blog below
and please feel free to sign up as a follower

Resultat- och inkomstplanering Fastigheter Bulletinen Svensk Skattetidning SvSkt Pågående arbeten Tantiem

Method: Bringing Theory to Practice
Results: Publications and Lectures
Stay informed: Newsletter

Subscribe to Blog by Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Technical Updates – and the Comments are Back!

No comments Comments are closed Comments are disabled Comments are opened

Several enhancements has been made to the blog.

  • Platform: The entire blog is moved from the wordpress.com to the wordpress.org platform
    • Now I can develop the blog more freely
    • The previous sub domain consultjourney.wordpress.com is no longer needed, my new address is simply consultjourney.com
  • SSL: The blog is secured by a SSL-certificate
    • When you enter the blog the former prefix http is now replaced with https – but you don’t have to do anything, just use the link above!
  • Archive: When using the archive to the right, by choosing any month, the posts are now showed with an excerpt to give you a better overview
    • Before the archive showed the complete posts, leading to a lot of scrolling when looking for your desired post
  • Search: When using the search function the results are now showed with an excerpt to present a better overview
    • Before the complete posts were shown, causing unnecessary amount of scrolling
  • Comments: A test blocking robots has been added and the comment function is enabled again

My hope is that you’ll get a better surfing experience from now on!

My thanks to Mr. Jesper Thörn at Järna Kommunikation for assisting me with the changes 🙂


Lectures / Föreläsningar

Keep yourself updated by education! I give lectures on legislation and standards for accounting, as well as other economic topics.

Håll dig uppdaterad genom att gå på kurs! Jag håller föreläsningar om lagstiftning och K-regler för redovisning, liksom om andra företagsekonomiska ämnen.

  1. Choose lecture / Välj föreläsning (Publications & Lectures)
  2. Book / Boka (Contact)
  3. And-or buy the books! / Och-eller köp böckerna! (Publications & Lectures)

Comment and follow

Do you have opinions on this post?
You’re welcome to comment my blog below
and please feel free to sign up as a follower

Resultat- och inkomstplanering Fastigheter Bulletinen Svensk Skattetidning SvSkt Pågående arbeten Tantiem

Method: Bringing Theory to Practice
Results: Publications and Lectures
Stay informed: Newsletter

Subscribe to Blog by Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.