Commentary on Sections Changes in partnership Section 1261: Accounting periods of firms
3205.This section sets out how accounting periods of a firm are determined. It is based on section 114 of ICTA. The concept of an accounting period of a firm is used in section 1259 for the calculation of the firm’s profit or loss.
3206.An accounting period of a firm begins when the rule in section 114(1) of ICTA first applies. That is, when a company first carries on the trade etc in partnership. That circumstance is set out in subsections (2)(b) and (3) of the section.
3207.An accounting period of a firm ends when the rule in section 114(1) of ICTA no longer applies. That is, when the last company leaves a firm, or (if the company continues to carry on the trade etc) when the company is no longer in partnership. That circumstance is set out in subsections (2)(c) and (4) of the section.
3208.An accounting period of a firm ends when there is a change in the persons carrying on the trade etc and the change is treated by 114(1)(c) of ICTA as the transfer of the trade etc to a different company. That is, when there is no “corporate continuity” between the members of the firm before and after the change. That circumstance is set out in subsections (2)(d) and (5) of the section.
3209.The usual rules about an accounting period ending on a date to which the firm makes up accounts and about an accounting period ending on the expiration of 12 months apply without being specifically mentioned in this section.