BIR Ruling No. 462-2018

Quezon City

Sec. 41 of the NIRC of 1997, as amended; Sec.145 of RR 2

BIR Ruling No. 567-12 BIR Ruling No. 034-12

ISLA LIPANA & CO. 3-13-2018 #462-2018

29th Floor, Philamlife Tower

Makati City 8767 Paseo de Roxas 1226

Attention: ATTY.ALEXANDER B.CABRERA

Managing Partner, Tax Services

Gentlemen :

with the Securities and Exchange Commission (SEC) under SEC Registration No. Ingredients, Inc. (formerly EAC Industrial Ingredients, Inc.), is a corporation duly registered This refers to your letter dated December 28, 2010 stating that your client, Brenntag with TIN ; that it is engaged in the business of indenting.

importing, stocking of specialty chemicals, food ingredients and flavours, raw materials for plastic films and rubber, coatings and prints as well as other chemical products necessary for the production of pharmaceuticals, cosmetics, and industrial finished goods; that in July 2010,

Brenntag Ingredients, Inc. is using the first-in-first-out method in accounting for its inventories; Brenntag Ingredients, Inc. became part of the Brenntag Group of Companies; that currently

Companies, Brenntag Ingredients, Inc. decided to change its accounting method for inventory and that however, in order to align its inventory valuation with the Brenntag Group of valuation to the moving weighted-average method effective for taxable year 201 1.

inventory costing method from first-in-first-out method to the moving weighted average method. Based on the foregoing representations, you now request permission to change its

provide that from first-in-first-out (FIFO) method to the moving weighted average method pursuant to the amended, in relation to Section 145 of Revenue Regulations No. 2, pertinent portion of which Brenntag Ingredients, Inc. is hereby granted permission to change its inventory costing method provisions of Section 41 of the National Internal Revenue Code (Tax Code) of 1997, as In reply thereto, please be informed that on the basis of the above representations.

"Section 41. Inventories. - Whenever in the judgment of the Commissioner, the use of inventories is necessary in order to determine

taxpayer upon such basis as the Secretary of Finance, upon the clearly the income of any taxpayer, inventories shall be taken by such

prescribe as conforming as nearly as may be to the best accounting practice recommendation of the Commissioner, may, by rules and regulations, in the trade or business and as most clearly reflecting the income.

inventory for any taxable year, then such method shall be used in all prescribed by the Commissioner, uses a particular method of valuing its "If a taxpayer, after having complied with the terms and conditions

Subsequent taxable years unless: A

Isla Lipana- Brenntag Ingredients, Inc. 313-2018 462-2018

Page 2 of 2

method is authorized; or "(i) with the approval of the Commissioner, a change to a different

(e.g., its scarcity, liquidity, marketability and price movements) is such that therefore, it is necessary to modify the valuation method for purposes of inventory gains should be considered realized for tax purposes and. ascertaining the income, profit, or loss in a more realistic manner: Provided. however, That the Commissioner shall not exercise his authority to require a Provided, further, That any change in an inventory valuation method must be subject to approval by the Secretary of Finance. change in inventory method more often than once every three (3) years: "(ii) the Commissioner finds that the nature of the stock on hand

XXX XXX XXX

'Section 145. Valuation of Inventories. -- The law provides two tests to which each inventory must conform. -- (1) it must conform as nearly as possible to the best accounting practice in the trade or business, rules cannot be uniform but must give effect to trade customs which come within the scope of the best accounting practice in the particular trade or business. In order to clearly reflect income, the inventory practice of a given to consistency than to any particular method of inventory or basis of practice in a balance sheet showing the financial position of the taxpayer is, and (2) it must clearly reflect the income. It follows, therefore, that inventory taxpayer should be consistent from year to year, and greater weight is to be these regulations. An inventory that can be used under the best accounting as a general rule, regarded as clearly reflecting his income. " valuation, as long as the method or basis used is substantially in accord with

costing. (BIR Ruling Nos. 034-12 dated January 31, 2012 and 567-12 dated September 1i, Companies, the "first-in-first-out" method of inventory is no longer compatible with Brenntag to Brenntag Ingredients, Inc. the use of moving "weighted average" method in their inventor 2012) to the Brenntag Group of Companies' accounting practice, this Office hereby grants authority Ingredients, Inc.'s inventory valuation as the change in its accounting method will best conform Considering that Brenntag Ingredients, Inc. became part of the Brenntag Group of

investigation, it is discovered that the facts are different, then this ruling shall be considered This ruling is being issued on the basis of the foregoing facts as represented. If upon

null and void.

Recommending Approval:

iaueomyen

Commissioner of Internal Revenue CAESAR R. DULAY 014374