Possible Problems and Solutions in the Enforcement of Employees’ Profit Sharing
Date Issued
2007
Date
2007
Author(s)
Yang, Shi-Xiang
Abstract
Recently, a wide range of modifications have been made on the accounting treatment for Employees’ Profit Sharing Plans. On August 23, 2007, the Financial Accounting Standards No. 39 was approved and this stipulated that the Employees’ Profit Sharing should be treated as an expense beginning January 1, 2008. Therefore, it is important to analyze the new rules and topics related to propose some suggestions for the new rules to be executed more smoothly. irst, the research is about the effect of the modification on the financial statements and will be conducted based on the data of the IC design companies extracted from the Taiwan Economic Journal (TEJ) Database. On average, companies recognize 6.84% of net income after tax as expense in changes in accounting estimates in the coming year. Moreover, 67.86% of the companies will commit violation of the regulation set in the constitution if the expense of the Employee’s Profit Sharing is calculated based on the closing price of the last day of the fiscal year. econd, referring to the Issue No.262 of Accounting Research Monthly, the appropriate amount of Employees’ Profit Sharing that should be recognized as inventories and as expense is discussed. hird, adopting the ROC GAAP No. 39, companies should recognize the amount Employees’ Profit Sharing as expense. In order to calculate the tax expense, we need the amount of Employees’ Profit Sharing first, and vice versa. Therefore, it is difficult for the company to estimate the amount of Employees’ Profit Sharing expense on the balance sheet date. Here, the solution for this problem is discussed.ast, the influence of this regulation on all the other tax-related items, such as the permanent difference, cumulative difference, income tax credit, undistributed surplus, and allowance to reduce deferred tax asset to expected realizable value is discussed. eywords: Employees’ Profit Sharing, Earning Distribution, ROC GAAP No. 39
Subjects
Earning Distribution
ROC GAAP No. 39
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