Special items (finance)
A special reserves Share (Sopo) was until 2009 a special kind of reserves , on the liabilities side of the (trade) balance sheet separately from other reserves could be expelled. It was used to create a uniform balance sheet, i.e. a commercial and tax balance sheet that was as consistent as possible.
The legal basis was Section 247, Paragraph 3 of the old version of the German Commercial Code (HGB): liability items that are permissible for income tax purposes may be formed in the balance sheet. They are to be shown as a special item with a reserve portion and to be dissolved in accordance with tax law. A provision is not required in this respect.
Formation and dissolution
According to Section 254 of the old version of the German Commercial Code (HGB), depreciations could be carried out in accordance with commercial law , in order to set assets "at the lower value based on depreciation that is only permissible under tax law" . However, the use of additional depreciation due to tax law required the corresponding approach in the commercial balance sheet due to the (reverse) relevance (Section 5 (1) sentence 2 EStG old version). In addition to the possibility of direct deduction on the assets side (net method), additional depreciation due to tax law could also optionally be recognized as a liability (gross method). For this purpose, the difference between depreciation required under commercial law and depreciation permitted under tax law was entered as a value adjustment in the special item with a reserve portion (Section 247 (3) HGB old version). This should give companies the opportunity to avoid the falsification of the asset statement caused by additional tax depreciation. Another option for creating special items with a reserve component was tax-deductible reserves, i.e. reserves from not yet taxed profit that are later to be released in accordance with the provisions of tax laws (e.g. reserve for replacement purchases, reserve for capital gains, etc.).
According to Section 281, Paragraph 2, Clause 2 of the old version of the German Commercial Code (HGB), the entries in the special items in the other operating expenses and the income from the liquidation in the other operating income were to be shown separately in the income statement or in the notes. A dissolution was also necessary if the relevant asset should leave the company or the tax depreciation should be replaced by a purely commercial one.
According to Art. 66 (5) EGHGB, special items with a reserve portion were last allowed to be formed in the annual financial statements under commercial law for the financial year beginning before January 1, 2010, and valuations based on depreciation only permitted for tax purposes were included in the commercial balance sheet.
Dual character
The special item with a reserve share had a dual character of equity and debt. For this reason, their balance sheet was also shown as a separate item after equity and before provisions (§§ 247 Paragraph 3, 273 HGB). In the balance sheet analysis , for the sake of simplicity, this item was mostly assigned approx. 50% as equity-like to economic equity and 50% as tax provision to medium-term debt. For a more precise breakdown of this item, it was necessary to determine how high the tax rate would have been for a corresponding release in order to assign this portion to debt.
Through the Accounting Law Modernization Act (BilMoG), the reverse principle of decisive importance in the trade balance was largely repealed. With the mandatory application of the law from January 1, 2010, special items with an equity portion may no longer be newly formed; there are transitional regulations for previously created special items.
Special item for investment grants
Similarly, special items for investment grants are created if a company has received subsidies that are linked to conditions that have yet to be met, for example the creation of a certain number of jobs in a certain period. If the conditions are met, these special items are released through profit or loss and thus equity; in the event of non-fulfillment, the reserve is to be released and the grants received are to be repaid.
