A company has always closed its books on 31 December. In 2018 it changes its year end to 30 April and produces sixteen months of accounts. The preceding year basis no longer fits, because there is no accounting year that ended in the preceding year. The revenue then has a discretion to choose the basis, and in practice it takes whichever gives the higher profit over three years.
Exam questions give the profits for several periods and ask which basis the revenue will choose.
This topic covers the rule on a change of accounting date, how the revenue exercises its discretion, and how to apportion the profits of a long or short period by months. The previous topic covered basis periods, commencement and cessation. The next covers loss relief.
In 30 seconds
Rule: if a company changes its accounting date, the assessable profits of the year of change and the two following years are computed on the basis the Service thinks fit. Practice: compute the three years on the old basis and on the new basis, add each, and assess on the higher. Apportion profits by months.
Why it matters: a long period is split between years, a short period may leave a year with no accounting year ended.
Key terms in plain English
| Term | What it means |
|---|---|
| Accounting date | The date to which a company makes up its annual accounts |
| Old basis | Profits computed as if the date had not changed |
| New basis | Profits computed as if the new date had always applied |
| Discretion | The Service chooses the basis for the three years |
| Apportionment | Sharing profit over the months of a period |
Syllabus check
This topic is in syllabus area D, company taxation. It covers:
- the rule on a change of accounting date
- the old and new bases and the higher total
- apportionment of profits by months
CAMA 2020 and company tax
The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 377(1) and s. 378 | Directors prepare financial statements that give a true and fair view | The audited accounts and the dates they cover are the starting point for the tax computation |
| s. 305 and s. 308 | Directors must act in good faith and with the care, diligence and skill of a prudent director | Directors answer for correct returns and tax paid on time |
| s. 119 | A company must keep proper books of account | The records support every figure in the return and are kept for six years |
The rules in more depth
Why the normal rule fails
For an old business the basis is the preceding year. A change of accounting date breaks this, because either accounts are made up for more than twelve months to the new date, or two sets of accounts end in the same tax year, one for twelve months to the old date and one for fewer months to the new date.
In either case there may be no normal accounting year ended in the preceding year, and special rules are needed.
The rule
Under section 29(2) of the Companies Income Tax Act, whenever a company fails to make up its accounts to its normal year end, the assessable profits for the year of assessment in which this happens and for the two following years are computed on such basis as the Service in its discretion decides.
It may assess the three years on the actual basis instead of the preceding year basis, if this gives higher profits.
How the Service works it out
- Find the year of assessment in which the company failed to make up accounts to its normal date.
- Take the two years that follow.
- Compute the assessable profits of the three years on the old basis: as if the company had not changed its date.
- Compute them again on the new basis: as if the company had always made up accounts to the new date.
- Add each set of three years.
- Charge the higher total.
Apportioning profits
Profits of an accounting period are shared over the months it covers. A sixteen-month period of ₦336,000 gives ₦21,000 a month, so twelve months of it is ₦252,000 and four months is ₦84,000. A twelve-month period of ₦144,000 gives ₦12,000 a month.
The position from 2026
The rule above applies to years to 2025. From 1 January 2026 the Nigeria Tax Act 2025 and the Administration Act 2025 govern the periods and filing dates, so check them for a change of accounting date after that.
Worked examples
Example 1: change from December to April. A company made up accounts to 31 December for many years. It then prepared sixteen-month accounts to 30 April 2018. Adjusted profits are: twelve months to 31 December 2015, ₦180,000; twelve months to 31 December 2016, ₦240,000; sixteen months to 30 April 2018, ₦336,000; twelve months to 30 April 2019, ₦144,000.
- Old basis.
, as if the date had not changed: 2017 = year to 31 December 2016 = ₦240,000.
2018 = 1 January to 31 December 2017 = 12/16 × ₦336,000 = ₦252,000.
2019 = 1 January to 30 April 2018 (4/16 × ₦336,000 = ₦84,000) + 1 May to 31 December 2018 (8/12 × ₦144,000 = ₦96,000) = ₦180,000.
Total = ₦672,000. - New basis.
, as if the date were always 30 April: 2017 = 1 May to 31 December 2015 (8/12 × ₦180,000 = ₦120,000) + 1 January to 30 April 2016 (4/12 × ₦240,000 = ₦80,000) = ₦200,000.
2018 = 1 May to 31 December 2016 (8/12 × ₦240,000 = ₦160,000) + 1 January to 30 April 2017 (4/16 × ₦336,000 = ₦84,000) = ₦244,000.
2019 = 1 May 2017 to 30 April 2018 = 12/16 × ₦336,000 = ₦252,000.
Total = ₦696,000. - The new basis gives the higher total (₦696,000 against ₦672,000), so the Service assesses 2017 at ₦200,000, 2018 at ₦244,000 and 2019 at ₦252,000.
Note that the printed solution in the textbook shows ₦672,000 as the new-basis total; the correct sum of ₦200,000, ₦244,000 and ₦252,000 is ₦696,000, which is the figure the Service uses.
Example 2: a simple apportionment. A company changes from a December to a June year end and prepares eighteen-month accounts with a profit of ₦6,000,000.
- ₦6,000,000 ÷ 18 = ₦333,333 a month.
- Twelve months = ₦4,000,000 and six months = ₦2,000,000.
How to score full marks
- Name the three years: the year of change and the two after.
- Draw two columns, old basis and new basis, with the basis period beside each figure.
- Show the fraction for every part-year, for example 4/16 or 8/12.
- Conclude with the higher total and the final figures.
Common mistakes in the exam
- Using two years instead of three.
- Choosing the lower total.
- Dividing a sixteen-month profit by twelve.
- Mixing up which periods belong to which year of assessment.
Quick revision
- Year of change plus two years; revenue discretion.
- Old basis against new basis; the higher is charged.
- Apportion by months.
Practice questions
Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.
Question 1. On a change of accounting date, the years considered are:
- One
- Two
- Three
- Five
Show the answer
C. The year of change and the next two.
Question 2. The Service charges the:
- Lower total
- Higher total
- Average
- First year only
Show the answer
B. The practice is the higher of the two bases.
Question 3. The rule is in section:
- 29(2) of CITA
- 9 of CITA
- 33 of CITA
- 19 of CITA
Show the answer
A. Section 29(2).
Question 4. A sixteen-month profit of ₦160,000 gives each month:
- ₦8,000
- ₦10,000
- ₦12,000
- ₦16,000
Show the answer
B. 160,000 ÷ 16.
Question 5. The “old basis” assumes:
- The date never changed
- The date was always the new date
- No profit
- Cessation
Show the answer
A. As if there was no change.
Question 6. The “new basis” assumes:
- The date never changed
- The date was always the new date
- Commencement
- No tax
Show the answer
B. As if the company always used the new date.
Question 7. A reason the normal rule fails is that:
- No accounting year may have ended in the preceding year
- Tax is abolished
- The company is exempt
- Profit is nil
Show the answer
A. The preceding year basis needs a year of accounts.
Question 8. The Service’s power is described as:
- A duty
- A discretion
- An option for the company
- A penalty
Show the answer
B. Such basis as it thinks fit.
Question 9. Twelve months of a sixteen-month profit of ₦336,000 is:
- ₦168,000
- ₦252,000
- ₦336,000
- ₦224,000
Show the answer
B. 12/16 × 336,000.
Question 10. The year of change and the two following years are computed on:
- Always the preceding year basis
- Such basis as the Service decides
- Cash basis
- Nil
Show the answer
B. Section 29(2).
Question 11 (10 marks). Explain the basis of assessment on a change of accounting date. (10 marks)
Question 12 (10 marks). A company changes its year end. State the steps the Service follows to choose the basis. (5 marks)
Question 13 (10 marks). A company prepares fifteen-month accounts with a profit of ₦7,500,000. Compute the profit for twelve months and for three months. (5 marks)
Model answers
Show the model answer to Question 11
A change of accounting date breaks the preceding year basis. (2) Under section 29(2) the profits of the year of change and the two following years are computed on the basis the Service decides. (3) In practice it computes the three years on the old and the new basis and charges the higher. (3) Profits of long or short periods are apportioned by months. (2)
Show the model answer to Question 12
Find the year of change; (1) take the next two years; (1) compute on the old basis; (1) compute on the new basis; (1) add each and choose the higher. (1)
Show the model answer to Question 13
₦7,500,000 ÷ 15 = ₦500,000 a month. (2) Twelve months = ₦6,000,000. (2) Three months = ₦1,500,000. (1)
Pathfinder on Change of accounting date for companies: old basis, new basis and the higher total
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Revise first: The rules in more depth
Source: ICAN Pathfinder, Taxation. Diets covered: May 2026 and November 2025.
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