70. Accountancy services: tax accounting.

Tax accounting is the accounting process that focuses on tax issues - including filing tax returns and planning for future tax responsibilities - as opposed to the preparation of financial statements.

Tax law varies immensly from country to country, as well as between different regions and even cities.

For example, U.S. tax accounting refers to accounting for tax purposes in the United States. Unlike most countries, the United States has a comprehensive set of accounting principles for tax purposes, prescribed by tax law, which are separate and distinct from Generally Accepted Accounting Principles.

The Internal Revenue Code governs the application of tax accounting. Section 446 sets the basic rules for tax accounting. Tax accounting under section 446(a) emphasizes consistency for a tax accounting method with references to the applied financial accounting to determine the proper method. So the taxpayer must choose a tax accounting method using their financial accounting method as a reference point.

Types of tax accounting methods

Main article: Comparison of Cash Method and Accrual Method of accounting

Proper accounting methods are found in section 446(c)(1) to (4) which permits cash, accrual, and other methods approved by the IRS including combinations.

After choosing a tax accounting method, under section 446(b) the Secretary of the Treasury has wide discretion to re-compute the taxable income of the taxpayer by changing the accounting method to be used by the taxpayer in order to clearly reflect the taxpayer's income.

If the taxpayer engages in more than one business then it may use a different method for each business according to section 446(d).

Tax accounting method changes

If the taxpayer wants to change their tax accounting method, section 446(e) requires the taxpayer to acquire the consent of the Secretary of the Treasury. There are two kinds of changes, one where you must receive a letter of approval from the Secretary of the Treasury. Another type of change comes from a series of more routine changes each of which is an automatic change. To get the automatic change the taxpayer must fill out a form and return it to the Secretary of the Treasury.

The taxpayer can adopt another method if the taxpayer files a tax return using that method for two consecutive years. This is different from changing a tax accounting method under the release of the Secretary of the Treasury because in the case of adopting another method the IRS may assess fines and reallocate taxable income. If the taxpayer wants to return to the previous method the taxpayer must ask for permission from the Secretary following the 446(e) procedure.

If the taxpayer fails to request a change of method of accounting then according to section 446(f) the taxpayer does so at their own peril by exposure to penalties.

71.What does it mean “asset management”?

Asset management is the "coordinated activity of an organization to realize value from assets". In turn, Assets are defined as follows: "An asset is an item, thing or entity that has potential or actual value to an organization". This is deliberately wider than physical assets but these form an important focus for more organizations.

Asset Management involves the balancing of costs, opportunities and risks against the desired performance of assets, to achieve the organizational objectives. This balancing might need to be considered over diffrerent timeframes.

Asset management also enables an organzation to examine the need for, and performance of, assets and asset systems at different levels. Additionally, it enables the application of analytical approaches towards managing an asset over the different stages of its life cycle (which can start with the conception of the need for the asset, through to its disposal, and includes the managing of any potential post disposal liabilities).

Asset Management is the art and science of making the right decisions and optimising the delivery of value. A common objective is to minimise the whole life cost of assets but there may be other critical factors such as risk or business continuity to be considered objectively in this decision making.