MAT Computation for Ind as Compliant Companies
Ind AS-compliant companies calculate book profit for MAT as per Section 115JB, adjusted by specified additions and deletions. These adjustments account for items included in the Statement of Profit and Loss and Other Comprehensive Income (OCI).
Key Adjustments for Book Profit Calculation
- a)OCI Items Not Reclassified to Profit or Loss
o Adjustments for OCI items such as revaluation gains/losses on property, plant & equipment and intangible assets, re-measurements of defined benefit plans, and fair value changes in investments in equity instruments designated at FVTOCI.
o Change in fair value of liability that is attributable to change in credit risk (measured at FVTPL)
o Change in the time value of options that hedge a transaction-related hedged item if the hedge relates to a non-financial asset/liability or firm commitment thereof.
o Change in value of the forward element or foreign currency basis spread if the hedged item later leads to recognition of a non-financial asset/liability or firm commitment thereof.
- b)Non-Cash Asset Distribution in Demergers
o Adjustments are made for the difference between the carrying amount of assets and dividend payable upon distributing non-cash assets to shareholders.
o Changes in values of assets and liabilities received by the resulting company in a demerger are ignored for MAT purposes.
- c)Transition to Ind AS
o Adjustments arising on the first-time adoption of Ind AS (transition amount) are evenly distributed over five years, starting from the transition year.
o Exclusions from the transition amount (e.g., revaluation gains/losses on tangible/intangible assets, FVTOCI changes, etc.) are adjusted upon transfer or disposal of the respective asset.
OCI Adjustments
- Additions to Book Profit:
o Gains credited to OCI that will not be reclassified to profit or loss (e.g., revaluation gains, increase in time value of options/forward contracts, FVTOCI equity gains).
o Amount debited to Profit and Loss for non-cash asset distribution in a demerger.
- Deductions from Book Profit:
o Losses debited to OCI that will not be reclassified to profit or loss (e.g., revaluation gains, increase in time value of options/forward contracts, FVTOCI equity gains).
o Amount credited to Profit and Loss for non-cash asset distribution in a demerger.