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KOLEJ POLY-TECH MARA, KUALA LUMPUR

TAX370 Business Taxation
Chapter 1

Basis Period and Change in Accounting Dates

BASIS PERIOD

Commencement of business

Changes in accounting period

Choice of accounting year and required by

law, etc or otherwise and implications on
basis periods and adjusted income/(loss)

Required by law, etc or otherwise and

implications on basis periods and
adjusted income/(loss)

Computation of adjusted
income/(losses)

COMMENCEMENT OF BUSINESS
The commencement date and the year-end date are important for business source because :
Any revenue expense incurred before
the date of commencement is not
deductible in arriving at adjusted
income.

Capital allowance on qualifying capital

expenditure would be available beginning
from the first basis period where the
commencement date falls.

It results in the determination of

the YA.

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1. Commencement of business
First set of accounts
consists of 12
months?

Yes
BP = AP

No
Is it required by law or
complied to groups year
end?

No

Section 21A(1) applies UNTIL

a 12 months AP is obtained

Yes

BP = AP

Commencement of Business : First set of accounts consists of 12 months [sec 21A(4)]

Where a company, trust body or co-operative society commences to carry on a business on a day in a basis
year and makes its first set of accounts for a period of 12 months, then that accounting periods forms the
basis period for the relevant YA [sec 21A (4)]. There shall be no basis period in relation to the business for
the first year.
Example 1 :
H.U.D Sdn Bhd, commenced business on 1.3.2009 and closed its account to 28.2.2010.

Commencement of Business : Required by Law [sec 21A(5)]

Is required by law of the place of

incorporation to close its accounts on a
specified day

Being a company within a group, is

required to close its account on specified
day to coincide with the group year-end

Example 2 :
Solleh Ltd. commences business on 1.7.2009 in Malaysia and under the law of the country in which the
company was incorporated, it is required to make up its accounts to 30 Sept each year. Accounts were
made up from 1.7.2009 to 30.9.2009 and to the year ending 30 Sept thereafter.
Example 3 :
A new company which is a member of a group of companies (all the companies in the group make up their
accounts to 31 March) commenced business on 1.8.2009 and made up its accounts to 31.3.2010 and the
year ending 31 March thereafter.

Commencement of Business : Not required by Law

Where a company, trust body or co-operative society commences business and the first set of accounts
are not made up for a period of 12 months, there would be an overlapping period.
The first basis period is from the date of commencement to 31 Dec. The calendar year basis would
continue until a full 12 month accounting period is available.
Section 21A(2) would apply subsequently. [PR 7/2001]
Example 4:
Luth Catering Sdn Bhd commenced a food catering business on 1.4.2009 and made up the first set of
accounts to 30.6.2009 and annually to 30 June thereafter.
The adjusted income of the business was as follows :
RM
1.4.2009 30.6.2009
4,000
1.7.2009 30.6.2010
28,000
Example 5 :
East Mail Sdn Bhd commenced business on 1.3.2009 and closed its accounts to 31.1.2010 and to
31 January each year subsequently.
The accounting period would be :
1.3.2009 31.1.2010
1.2.2010 31.1.2011

Commencement of Business : 31 December year end

Where a company, trust body or co-operative society commences business and the first set of accounts
are not made up for a period of 12 months, there will not be any overlapping basis period if a 31 Dec
year-end is chosen.
Example 6 :
Ishak Sdn Bhd commenced business on 14.9.2009. It closes its first set of accounts to 31.12.2009 and
thereafter 31 Dec.

CHANGES IN ACCOUNTING DATE

A company may change the accounting period from time to time owing to various reasons. Changes in
accounting period may change the basis period of a company.
Where the accounts are not prepared for a normal period of 12 months, it is known as a failure year.

Change in accounting date

Ending 31 Dec

NOT ending 31 Dec

BP for the YEAR OF CHANGE

= ending 31 Dec

Consists LESS
than 12 months

AP ending in the
following year

AP ending in
the same year

BP = AP

Consists MORE
than 12 months

AP ending in the
following year

AP ending in
the third year

BP = AP
BP =
AP would be added
with the following AP

BP = AP will be
apportioned equally

Normal accounting date ending on 31 December

Where there is a change in accounting date, the provisions of Sec 21A(2) will apply.
Where the accounts are normally prepared up to 31 Dec each year and there is a change of accounting
period to non 31 Dec the basis period in the year where changes are made shall end on 31 Dec.
The subsequent basis period after the year of change should also end on 31 Dec unless there is a
12 month accounting period ending in that year.
Example 7 :
Yaacob Sdn Bhd normally makes up account to 31 Dec each year. On 1 May 2010, for its own
convenience, the company changed its financial year end to 30 June. The company drew up accounts as
follows :
1.1.2009 31.12.2009
1.1.2010 30.6.2010
1.7.2010 30.6.2011

Example 8 :
Yusoff & Ayob Bhd normally makes up account to 31 Dec. For its own convenience, the company
changed its financial year end to 30 June. The company drew up the accounts and computed the
adjusted income/(loss) for each of the accounting periods as follows :

Year ended 31.12.2008

1.1.2009 30.6.2009
1.7.2010 30.6.2010

Adjusted income/(loss)
RM
18,000
24,000
( 6,000)

Calculate the adjusted income/loss for the relevant YAs.

Example 9 :
Shuib Sdn Bhds accounting date is 31 Dec. The company changed its accounting date to 30 Sept. The
adjusted income and the accounting dates are as follows :

1.1.2008 31.12.2008
1.1.2009 30.9.2009
1.10.2009 30.9.2010

Adjusted income/(loss)
RM
900,000
600,000
1,200,000

Calculate the adjusted income if Shuib Sdn Bhd had to change its accounting date to 30 Sept so that its
financial year will coincide with that of its holding company.

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Normal accounting date NOT ending 31 December
Where there is a failure to make up accounts for a 12 months period due to a change of accounting date,
the Director General may direct the basis period in which there is a failure to make up accounts for the
normal 12 months and the following YA.
g Where new accounts are prepared for LESS than 12 months (not ending 31 Dec)
Where the change of accounting date results in the new accounting period is less than 12 months, the
Director General will direct the basis period as follows :
New accounts ending in the following year
In situation where the new set of accounts ends in the following year of the normal year end (12
months), the new accounting period is the basis period for the YA in the failure year.
Example 10 :
M.U.S.A Bhd normally makes up its account to 30 Nov. It decided to change its accounting year-end
to 31 March so as to be coterminous with its manufacturing operations. The accounts are made up as
follows :

Year ended 30.11.2008

1.12.2008 31.3.2009
Year ended 31.3.2010

Adjusted income
Adjusted income
Adjusted income

RM
24,000
10,000
18,000

Failure year is 2009, since the new account 1.12.2008 to 31.3.2009 is ending following the normal
12 months in 2008, the basis period would be accepted for YA 2009.
Example 11 :
Harun Bhd normally prepares its accounts to 30 Sept annually. The company changed its accounting
year-end to 30 June for its own convenience. The accounting periods and the adjusted income for
each period was as follows :
Year ended 30.9.2008
1.10.2008 30.6.2009
1.7.2009 30.6.20010

Adjusted income
Adjusted income
Adjusted income

RM
20,400
15,600
42,600

New accounts and the last accounts ending the same year
In situation where the new accounting period and the last accounts ending in the same year, such
new accounting period would be added with the following accounting period to be the basis period
for the YA in the failure year.
Example 12 :
Zulkifli Bhd normally closes its accounts on 30 June. The company decides to change its accounting
date to close on 31 Dec. The accounts are made up as follows :
1.7.2008 30.6.2009
1.7.2009 31.12.2009 (new accounting date)
1.1.2010 31.12.2010

g Where new accounts are prepared for MORE than 12 months

Public Ruling No, 7/2001 stipulates 2 situations that the DG may direct the basis period for the YA in the
failure year. Failure year refers to a year that does not have a 12 months account.
New accounts ending in the following year
In situation where the new accounting period which consists of more than 12 months ending in the
following year of the normal year end, the new accounting period would then be the basis period for
the YA in the failure year.
Example 13 :
DAUD Bhd normally makes up its account to 30 June every year. It decided to change its accounting
year-end to 30 Sept. The accounts are made up as follows :
Year ended 30.6.2008
1.7.2008 30.9.2009
Year ended 30.9.2010

(12 months)
(15 months)
(12 months)

New accounts ending in the third year

In situation where the new accounting period spread over three basis years, the new accounting
period will be apportioned equally. The 2 periods will form the basis period for the first 2 YAs for
the failure year and its subsequent year.
Example 14 :
Sulaiman Sdn Bhd closes its accounts to 30 Nov each year. On 1.12.2008, its decides to change its
accounting date to 28 Feb for its subsequent years. The company closes the account from
1.12.2008 to 28.2.2010 (15 months). The accounts are made up as follows :
Year ended 30.11.2008
1.12.2008 28.2.2010

(12 months)
(15 months)