Determining with certainty how the tax authorities will treat a particular financial instrument issued is not straightforward, and this poses a risk to corporate taxpayers tasked with generating shareholder value and predictable shareholder returns. The tax classification of financial instruments, as either debt or equity instruments, may have a profound impact from a corporate taxation perspective and the reclassification of financial instruments by a tax authority, in an unanticipated manner, can alter expected tax consequences. Previous studies have placed less emphasis on the potential discrepancies between the debt or equity classification of financial instruments from a tax-versus-corporate-reporting perspective and the reasons for such potential discrepancies. This study aims to identify potential factors, giving rise to divergent financial instrument classifications between tax and financial reporting, in order to gain insight into the reasons for the potential divergence. The research objectives of the study are to determine whether there is incongruity between the tax and accounting classification of selected financial instruments; to identify the factors giving rise to a possible incongruent outcome; and to evaluate the reasons for incongruity, in order to gain insight into the differing objectives of taxation and corporate reporting. Case studies were obtained from the technical department of a large accountancy firm in South Africa to analyse specific fact patterns. It was found that incongruence exists between the financial reporting and taxation classification of financial instruments from the perspective of the issuer of those instruments. This incongruence was attributed to the impact of contingent settlement provisions and the rules-based approach adopted by tax authorities, as opposed to the principle or substance-based approach favoured by financial reporting. The incongruence noted suggests that, based on their differing objectives, financial reporting favours the classification of financial instruments as debt whilst taxation favours the classification of financial instruments as equity. Although the approaches currently followed by financial reporting and taxation are different, recent taxation amendments have incorporated financial reporting guidance into the Income Tax Act 58 of 1962. Future research can be conducted to determine the impact of aligning financial reporting and taxation principles on tax certainty from a taxpayer perspective. / Dissertation (MCom)--University of Pretoria, 2012. / lmchunu2014 / Taxation / unrestricted

Desde a adoção das normas internacionais de relatórios financeiros (IFRS) no Brasil, em 2010, a discussão sobre a classificação de instrumentos financeiros entre instrumentos de dívida ou de patrimônio tem se intensificado. Quando a Lei 11.638/07 foi emitida, alterando a Lei das Sociedades por Ações de 1976, teve o condão de introduzir o padrão contábil internacional na contabilidade brasileira. Entretanto, muitos dos instrumentos e aspectos da legislação societária brasileira não foram alterados ou reavaliados à luz desse novo padrão. De um momento para o outro, empresas se viram obrigadas a classificar como dívida, valores antes classificados com patrimônio líquido, como foram os diversos casos de ações resgatáveis. A própria classificação das ações ordinárias e preferenciais como instrumentos de patrimônio líquido foi colocada em dúvida devido à previsão do chamado dividendo mínimo obrigatório. Nesse ínterim, companhias abertas brasileiras emitiram certos instrumentos financeiros, analisaram e os classificaram como instrumentos de patrimônio líquido. Entretanto, tiveram tal classificação questionada pela CVM e foram requeridas a refazer suas demonstrações financeiras. Mesmo internacionalmente essa classificação não é, muitas vezes, óbvia. As últimas discussões no âmbito internacional relacionados com a classificação de instrumentos financeiros como de dívida ou de patrimônio se concentraram em duas abordagens: a \"abordagem restrita do patrimônio líquido\" (Narrow Equity Approach) e a \"abordagem estrita do passivo\" (Strict Obligation Approach). Este trabalho tem como objetivo avaliar a classificação dos instrumentos financeiros patrimoniais previstos na legislação societária brasileira à luz das normas internacionais de relatórios financeiros. Primeiramente entendendo e avaliando os casos de determinação da CVM de refazimento das demonstrações financeiras de companhias em virtude de classificação considerada inadequada de certos instrumentos financeiros como de patrimônio líquido. Em seguida, avaliando a natureza dos instrumentos patrimoniais previstos na legislação societária brasileira, especialmente as ações com dividendos prioritários, e o impacto dessa prioridade nas demonstrações financeiras das companhias. Com base nos resultados do estudo, concluiu-se que os casos de refazimento estavam relacionados a uma tentativa de classificar instrumentos típicos de dívida como patrimoniais, a partir da alteração de certos termos, mas sem atender a todos os requisitos da norma contábil. Adicionalmente, para as companhias com ações preferenciais com dividendos prioritários, observamos que os instrumentos atendiam a classificação de patrimônio líquido e que a prioridade no recebimento trouxe benefícios de fato para os seus detentores. / Since the adoption of the International Financial Reporting Standards in Brazil, in 2010, the discussion on the classification of financial instruments between debt or equity instruments has intensified. When the law 11,638/07 was issued, changing the Brazilian Corporate Law of 1976, had the effect of introducing international accounting standards in the Brazilian accounting environment. However, many of the instruments and aspects of Brazilian corporate legislation have not changed or reassessed in the light of this new standard. From one moment to the next, companies were required to reclassify amounts from equity to debt, as were the various cases of redeemable shares. Even the classification of ordinary and preferred shares as equity instruments was questioned due to the statutory minimum mandatory dividend. In the meantime, Brazilian listed companies have issued certain financial instruments, analyzed and classified them as equity instruments. However, they had such a classification questioned by the Brazilian Securities and Exchange Comission (CVM) and were required to restate their financial statements. Even internationally, this classification is not often obvious. The latest discussions in the international forum related to the classification of financial instruments as debt or equity focused on two approaches: the Narrow Equity Approach and the Strict Obligation Approach. This study aims to evaluate the classification of equity financial instruments as per the Brazilian corporate legislation in light of the International Financial Reporting Standards. Firstly, understanding and evaluating the cases of restatement of the financial statements of companies as determined by CVM due to misclassification of certain financial instruments as equity. Then, assessing the nature of equity instruments as per the Brazilian corporate legislation, especially the shares with priority dividends, and the impact of this priority in the financial statements of the company. Based on the results of the study, it was concluded that the restatements were related to the attempt of classifying typical debt instruments as equity, by amending certain of their terms, but not meeting all the requirements of the relevant accounting standard. Additionally, for companies with preferred shares with priority dividends, we observed that the instruments were classified as equity and that the priority has effectively brought benefits to these shareholders.

Desde a adoção das normas internacionais de relatórios financeiros (IFRS) no Brasil, em 2010, a discussão sobre a classificação de instrumentos financeiros entre instrumentos de dívida ou de patrimônio tem se intensificado. Quando a Lei 11.638/07 foi emitida, alterando a Lei das Sociedades por Ações de 1976, teve o condão de introduzir o padrão contábil internacional na contabilidade brasileira. Entretanto, muitos dos instrumentos e aspectos da legislação societária brasileira não foram alterados ou reavaliados à luz desse novo padrão. De um momento para o outro, empresas se viram obrigadas a classificar como dívida, valores antes classificados com patrimônio líquido, como foram os diversos casos de ações resgatáveis. A própria classificação das ações ordinárias e preferenciais como instrumentos de patrimônio líquido foi colocada em dúvida devido à previsão do chamado dividendo mínimo obrigatório. Nesse ínterim, companhias abertas brasileiras emitiram certos instrumentos financeiros, analisaram e os classificaram como instrumentos de patrimônio líquido. Entretanto, tiveram tal classificação questionada pela CVM e foram requeridas a refazer suas demonstrações financeiras. Mesmo internacionalmente essa classificação não é, muitas vezes, óbvia. As últimas discussões no âmbito internacional relacionados com a classificação de instrumentos financeiros como de dívida ou de patrimônio se concentraram em duas abordagens: a \"abordagem restrita do patrimônio líquido\" (Narrow Equity Approach) e a \"abordagem estrita do passivo\" (Strict Obligation Approach). Este trabalho tem como objetivo avaliar a classificação dos instrumentos financeiros patrimoniais previstos na legislação societária brasileira à luz das normas internacionais de relatórios financeiros. Primeiramente entendendo e avaliando os casos de determinação da CVM de refazimento das demonstrações financeiras de companhias em virtude de classificação considerada inadequada de certos instrumentos financeiros como de patrimônio líquido. Em seguida, avaliando a natureza dos instrumentos patrimoniais previstos na legislação societária brasileira, especialmente as ações com dividendos prioritários, e o impacto dessa prioridade nas demonstrações financeiras das companhias. Com base nos resultados do estudo, concluiu-se que os casos de refazimento estavam relacionados a uma tentativa de classificar instrumentos típicos de dívida como patrimoniais, a partir da alteração de certos termos, mas sem atender a todos os requisitos da norma contábil. Adicionalmente, para as companhias com ações preferenciais com dividendos prioritários, observamos que os instrumentos atendiam a classificação de patrimônio líquido e que a prioridade no recebimento trouxe benefícios de fato para os seus detentores. / Since the adoption of the International Financial Reporting Standards in Brazil, in 2010, the discussion on the classification of financial instruments between debt or equity instruments has intensified. When the law 11,638/07 was issued, changing the Brazilian Corporate Law of 1976, had the effect of introducing international accounting standards in the Brazilian accounting environment. However, many of the instruments and aspects of Brazilian corporate legislation have not changed or reassessed in the light of this new standard. From one moment to the next, companies were required to reclassify amounts from equity to debt, as were the various cases of redeemable shares. Even the classification of ordinary and preferred shares as equity instruments was questioned due to the statutory minimum mandatory dividend. In the meantime, Brazilian listed companies have issued certain financial instruments, analyzed and classified them as equity instruments. However, they had such a classification questioned by the Brazilian Securities and Exchange Comission (CVM) and were required to restate their financial statements. Even internationally, this classification is not often obvious. The latest discussions in the international forum related to the classification of financial instruments as debt or equity focused on two approaches: the Narrow Equity Approach and the Strict Obligation Approach. This study aims to evaluate the classification of equity financial instruments as per the Brazilian corporate legislation in light of the International Financial Reporting Standards. Firstly, understanding and evaluating the cases of restatement of the financial statements of companies as determined by CVM due to misclassification of certain financial instruments as equity. Then, assessing the nature of equity instruments as per the Brazilian corporate legislation, especially the shares with priority dividends, and the impact of this priority in the financial statements of the company. Based on the results of the study, it was concluded that the restatements were related to the attempt of classifying typical debt instruments as equity, by amending certain of their terms, but not meeting all the requirements of the relevant accounting standard. Additionally, for companies with preferred shares with priority dividends, we observed that the instruments were classified as equity and that the priority has effectively brought benefits to these shareholders.