Taxation (International and Other Provisions) Act 2010 section 371VC

Accounting profits

Section 371VC defines how a controlled foreign company's accounting profits are determined for the purposes of the CFC rules, including what counts as acceptable accounting practice and how foreign currency amounts are converted to sterling.

• A CFC's accounting profits are its pre-tax profits, normally taken from financial statements prepared under an acceptable accounting practice
• If financial statements are not prepared properly or not produced within 12 months of the period end, profits must be calculated as if statements had been prepared under the CFC's usual accounting practice, or failing that, under international accounting standards
• Acceptable accounting practice means international accounting standards, UK GAAP, or the generally accepted accounting practice in the CFC's country of residence
• Where accounting profits are in a foreign currency, they must be translated into sterling using the average exchange rate for the period, calculated from daily spot rates