8‑70 Meaning of Qualified Financial Stat8‑70 Meaning of Qualified Financial Statements

8‑70 Meaning of Qualified Financial Statements

(1) An MNE Group’s Qualified Financial Statements means the following: (a) the financial accounts used to prepare the Consolidated Financial Statements of the Ultimate Parent Entity of the MNE Group; (b) separate financial statements of a Constituent Entity of the MNE Group, if: (i) they are prepared in accordance with an Acceptable Financial Accounting Standard or an Authorised Financial Accounting Standard; and (ii) the information contained in them is maintained based on that accounting standard and is reliable; (c) the separate financial accounts of a Constituent Entity of the MNE Group, if: (i) they are used for preparation of the MNE Group’s Country‑by‑Country Report; and (ii) the Constituent Entity is not included in the MNE Group’s Consolidated Financial Statements on a line‑by‑line basis, and this is solely due to size or materiality grounds; (d) if a Permanent Establishment that is a Constituent Entity of the MNE Group does not have separate financial accounts mentioned in paragraph (a) or separate financial statements mentioned in paragraph (b)—the separate financial statements prepared by the Main Entity of the Permanent Establishment for financial reporting, regulatory, tax reporting or internal management control purposes. (2) Subsection (3) applies if the MNE Group allocated and incorporated purchase accounting adjustments into any of the following: (a) where paragraph (1)(a) applies—the separate financial accounts of a Constituent Entity that are used in the preparation of the Consolidated Financial Statements mentioned in that paragraph; (b) where paragraph (1)(b) applies—the separate financial statements mentioned in that paragraph; (c) where paragraph (1)(c) applies—the separate financial accounts mentioned in that paragraph; (d) where paragraph (1)(d) applies—the separate financial statements mentioned in that paragraph. (3) Despite subsection (1), those separate financial accounts or separate financial statements are not Qualified Financial Statements, unless the conditions in subsections (4) and (5) are met. Consistent reporting condition (4) The condition in this subsection is met if: (a) the MNE Group has not submitted a Country‑by‑Country Report for a Fiscal Year beginning after 31 December 2022 that was based on the Constituent Entity’s separate financial accounts or separate financial statements without the purchase accounting adjustments; or (b) where the MNE Group has submitted such a Country‑by‑Country Report for a Fiscal Year beginning after 31 December 2022—the Constituent Entity was required by law or regulation to change its separate financial accounts or separate financial statements for the Fiscal Year to include purchase accounting adjustments. Goodwill impairment adjustment (5) The condition in this subsection is met if any reduction to the Constituent Entity’s income attributable to an impairment of goodwill related to transactions entered into after 30 November 2021 is added back to the MNE Group’s profit or loss before income tax: (a) for the purposes of applying the Routine profits test; and (b) for the purposes of applying the Simplified ETR test, but only if the financial accounts or separate financial statements do not also have a reversal of deferred tax liability, or recognition or increase of a deferred tax asset, in respect of the impairment of goodwill.