3‑10 Meaning of Financial Accounting Net3‑10 Meaning of Financial Accounting Net Income or Loss

3‑10 Meaning of Financial Accounting Net Income or Loss

(1) The Financial Accounting Net Income or Loss for a Constituent Entity of an MNE Group for a Fiscal Year is the net income or loss determined for the Constituent Entity (before any consolidation adjustments eliminating intra‑group transactions) in preparing Consolidated Financial Statements of the Ultimate Parent Entity of the MNE Group for the Fiscal Year. (2) For the purposes of subsection (1), take into account items of income and expense in the Consolidated Financial Statements only to the extent that those items: (a) reliably and consistently reflect the affairs of the Constituent Entity; and (b) are not reflected in the separate financial accounts of the Constituent Entity. (3) To avoid doubt, the Financial Accounting Net Income or Loss for the Constituent Entity for the Fiscal Year includes income, expenses, gains and losses arising from transactions between the Constituent Entity and any other Constituent Entity of the MNE Group.

Note: Financial Accounting Net Income or Loss may be adjusted to exclude such income, expenses, gains and losses if an election under subsection 3‑200(1) applies.

(4) However, the Financial Accounting Net Income or Loss for the Constituent Entity for a Fiscal Year does not include any amount attributable to any purchase accounting adjustment that: (a) is reflected in: (i) the Consolidated Financial Statements of the Ultimate Parent Entity of the MNE Group for the Fiscal Year; or (ii) the Constituent Entity’s financial accounts for the Fiscal Year; and (b) arises as a result of an Entity becoming a Constituent Entity of the MNE Group as a result of the acquisition of Ownership Interests in that Entity by an existing Constituent Entity. (5) Subsection (4) does not apply if: (a) the acquisition occurred before 1 December 2021; and (b) it is not reasonably practicable to determine the Constituent Entity’s Financial Accounting Net Income or Loss for the Fiscal Year in the absence of the adjustment. (6) Subsection (7) applies if it is not reasonably practicable to compute the Financial Accounting Net Income or Loss for a Constituent Entity of an MNE Group for a Fiscal Year based on the accounting standard (the UPE accounting standard) used in the preparation of Consolidated Financial Statements of the Ultimate Parent Entity of the MNE Group for the Fiscal Year. (7) Compute the Financial Accounting Net Income or Loss for the Constituent Entity for the Fiscal Year using another Acceptable Financial Accounting Standard or an Authorised Financial Accounting Standard if: (a) the financial accounts of the Constituent Entity for the Fiscal Year are maintained based on the other accounting standard; and (b) the information contained in those financial accounts is reliable; and (c) in the case of an Authorised Financial Accounting Standard—the financial accounts have been prepared subject to adjustments to prevent any Material Competitive Distortions; and (d) adjustments are made to eliminate permanent differences that: (i) arise for the Fiscal Year; and (ii) are, in the aggregate, in excess of 1 million Euros; and (iii) arise because of the application of a particular principle or standard under the other accounting standard (instead of the application of the UPE accounting standard) to items of income or expense or transactions; and (e) it appears from the content of the GloBE Information Return for the MNE Group for the Fiscal Year that the Financial Accounting Net Income or Loss for the Constituent Entity for the Fiscal Year has been computed in accordance with this section.