Losses from theft of funds must be recognized in the period they are detected

The accounting treatment of losses derived from the theft of funds has raised doubts as to whether these should be attributed to previous periods by charging them to reserves or if they should be recorded in the current period. The Dirección General de Tributos (DGT) has issued a ruling that defines the timing of their recognition.

What the DGT has ruled

The query concerned the correct way to record the regularization of stolen amounts that correspond to previous periods, specifically analyzing whether it was appropriate to apply Rule 22 of the General Accounting Plan (PGC) to charge such amounts to reserves.

After analyzing the regulations, the DGT determines that the expense for the stolen amounts must be recognized in the period in which the regularization occurs, provided that the annual accounts for the affected periods have not yet been prepared. This criterion is based on the application of the Corporate Income Tax Law (LIS) and the General Tax Law, linking the economic reality of the event with the moment of its detection and accounting regularization.

What this means for you

For companies that detect shortages of funds or the theft of assets belonging to previous accounting periods, this criterion establishes a clear roadmap to avoid errors in determining the taxable base for Corporate Income Tax.

If the company detects the theft and has not yet prepared the accounts for the affected periods, it should not resort to charging reserves in accordance with accounting standards for errors, but should instead record the expense in the current period. This directly impacts the tax deductibility of such losses and the integrity of the financial information presented to the Tax Administration.

What you should do

Upon detecting irregularities in funds, it is necessary to:

• Verify the preparation status of the annual accounts for the affected periods.
• Ensure that the accounting record of the loss is made in the period in which the regularization of the amounts occurs.
• Assess the specific situation of the company to ensure that the tax treatment is correct according to the Corporate Income Tax Law.