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BAP calls for inclusion of tax assets in capital |
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(09 February 2004, Monday - Philippine Daily Inquirer)
By Doris C. Dumlao THE BANKERS Association of the Philippines has requested the Bangko Sentral ng Pilipinas to allow banks to include deferred tax assets in the computation of their capital. |
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Banks currently set aside 32 percent of loan loss provisions as DTA, which is then deducted from the banks' taxable income for the following year.
The BSP, however, does not include this amount in computing the banks' capital. In a recent press briefing, BAP president Cesar Virata said that since the Philippines would adopt a new International Accounting Standard next year, the BSP must change the accounting treatment of these assets worth roughly 130 billion pesos. Under the new standard, deferred tax assets would not be recognized unless these are used. "For example, in the case of Japanese banks, for so many years they have not been able to use their deferred tax assets because they continue to incur losses. Under the new rule, the auditors and management will not be allowed to book a deferred tax asset unless there is a calculation it can be used in the future," Virata said. The BSP estimates that banks have an average of two billion to three billion pesos in DTA as the banks set aside funds to cover for possible losses from bad loans. The total loan loss reserves of the commercial banking system currently stands at 126.946 billion pesos. "What the central bank does now is deduct totally. We said it shouldn't be that way because we can make use of the DTA and it is unfair because it is recognized by the SEC (Securities and Exchange Commission) and yet the BSP does not recognize it," Virata said. home | latest news |
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