Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 820.635

The opening and closing balances method

    An entity that uses the opening and closing balances method for a period must apply the following method statement to calculate the average value of a matter for that period.

Method statement

Step 1.   Work out the value of the particular matter as at the first day of that period .

Step 2.   Work out the value of the particular matter as at the last day of that period.

Step 3.   Add the results of steps 1 and 2.

Step 4.   Divide the result of step 3 by 2. The result of this step is the average value.

Example:   ALWZ Corporation, a company that is an Australian entity, held assets valued at $95 million on the first day of an income year. It held assets valued at $105 million at the end of that year. Adding those amounts and dividing the result by 2 gives the average value of its assets for that year, which is $100 million.


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