scholarly journals Deferred Taxes Revisited

2011 ◽  
Vol 2 (8) ◽  
Author(s):  
Ron Colley ◽  
Joseph Rue ◽  
Ara Volkan
Keyword(s):  
Relative Size ◽  
Financial Evaluation ◽  
Deferred Taxes ◽  
Average Decrease ◽  
Flow Through ◽  
Accounting Theory ◽  
Deferred Tax ◽  
The Individual ◽  
The Impact ◽  
Tax Accounting

<p class="MsoBlockText" style="line-height: normal; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">The study examines the deferred tax accounting theory and procedures required by the FASB in the context of the unit problem. The unit problem involves the selection of the appropriate perspective (either individual or aggregate) for applying measurement and recognition conventions to phenomena of interest. From an individual event perspective, the FASB's conclusions regarding liability recognition are inconsistent with the definition of liabilities found in the Statement of Financial Accounting Concepts No. 6. In addition, the use of inconsistent perspectives by S109 creates disagreements with the FASB&rsquo;s position, where both the individual and aggregate perspectives are used simultaneously as the basis of the FASB's decisions. The study argues that the income tax accounting issue should be viewed from an aggregate perspective and concludes that the flow-through method of accounting for income taxes should be adopted. The impact of eliminating deferred taxes and adjusting the liability and stockholders equity balances on the debt-to-equity (DTE) ratio is computed for the entire COMPUSTAT database (20 years). For the 817 firms that persist throughout the 20-year period, each year, the net deferred tax balance for each company is compared to the balance in the previous year, with increases (53%) outnumbering decreases (32%), and the remainder (15%) showing no change. In addition, the average annual net deferred tax balances of entire sample show increases for the 15 of the 20 years examined and the balances for persisting firms show increases for 17 of the 20 years examined. Finally, the relative size of the net deferred tax balances as a percentage of total assets and total liabilities for both the overall sample and the persisting firms range from 4.1% to 5.8% of total assets and from 7.9% to 11.8% of total liabilities. Statistical results show that the decreases in the DTE ratio are significant for each year, with an overall average decrease of 19%. Thus, the flow-through method results in significant changes in a key ratio that is used in the financial evaluation of most companies. Conversely, the DTE ratios currently used in the financial evaluation of companies are flawed because the net deferred tax balances are included in liabilities, when it is clear that these accounts do not meet the liability criteria specified in accounting theory.</span></span></p>

scholarly journals Continuing Case Against Inter-Period Tax Allocation

2011 ◽  
Vol 7 (6) ◽  
Author(s):  
Ron Colley ◽  
Joseph Rue ◽  
Ara Volkan
Keyword(s):  
Financial Accounting ◽  
Font Size ◽  
Individual Event ◽  
Deferred Taxes ◽  
Accounting Theory ◽  
Deferred Tax ◽  
Definition Of ◽  
The Individual ◽  
The Impact ◽  
Selection Of

<p class="MsoBlockText" style="line-height: normal; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">The annual and industry-based behavior of deferred tax balances is analyzed and the accounting theory and procedures required by the FASB are examined in the context of the unit problem. The unit problem involves the selection of the appropriate perspective (either individual or aggregate) for applying measurement and recognition conventions to phenomena of interest. From an individual event perspective, the FASB's conclusions regarding liability recognition are inconsistent with the definition of liabilities found in the Statement of Financial Accounting Concepts No. 6. In addition, the use of inconsistent perspectives by S109 creates disagreements with the FASB&rsquo;s position, where both the individual and aggregate perspectives are used simultaneously as the basis of the FASB's decisions. The impact of eliminating deferred taxes and adjusting the liability and stockholders equity balances on the debt-to-equity (DTE) ratio is computed for each year and 20 industries in the COMPUSTAT database (1997 &ndash; 2006). The change results in significant decreases in DTE each year and in all industries.</span></span></p>

scholarly journals Accounting For Deferred Taxes: Time For A Change

2012 ◽  
Vol 10 (3) ◽  
pp. 149 ◽  
Author(s):  
Ron Colley ◽  
Joseph Rue ◽  
Adrian Valencia ◽  
Ara Volkan
Keyword(s):  
Accounting Standards ◽  
Reporting Standards ◽  
Deferred Taxes ◽  
Current Accounting ◽  
Financial Consequences ◽  
Flow Through ◽  
Deferred Tax ◽  
Accounting Convergence ◽  
Made In ◽  
Tax Accounting

<p>This study examines the theory underlying the current accounting and reporting standards for deferred taxes. Given the goal of global accounting convergence and under the proposed condorsement approach, the FASB and the IASB have a historic opportunity to revise the existing deferred tax accounting standards. Thus, it is warranted to illustrate the financial consequences of using the proposed flow-through (where tax expense is equal to the statutory tax liability) approach versus the asset-liability method of accounting for deferred taxes. We achieve this objective by computing the change in the debt-to-equity (DTE) ratios for the 2004-2010 period when net deferred tax balances are eliminated and corresponding adjustments are made in the total liability and stockholders equity balances. Based on our observations, we propose that the underlying issue in accounting for deferred taxes is the unit problem and argue that deferred taxes do not represent assets and liabilities as defined by accounting standards.<strong></strong></p>

Russian Accounting Standard (PBU) 18/02: Principles on the balance method use

2020 ◽  
Vol 23 (12) ◽  
pp. 1356-1382
Author(s):  
E.V. Olomskaya ◽  
A.A. Aksent'ev
Keyword(s):  
Balance Method ◽  
Deferred Taxes ◽  
Accounting Standard ◽  
Scientific Methods ◽  
The Public ◽  
General Scientific ◽  
The Impact ◽  
Original Approach ◽  
Descriptive Method ◽  
Tax Accounting

Subject. This article discusses the methodological features of Russian Accounting Standard (PBU) 18/02 Income Tax Accounting when using the balance method to account for deferred taxes. It considers whether the clarification of permanent tax differences is justified, and it analyzes in detail the features of accounting for temporary differences and offers a visual and descriptive method for determining and correlating them in accounts. Objectives. The article aims to justify the reason for linking permanent tax differences to such accounting categories as Income and Expenses. It also aims to develop a methodological toolkit that simplifies the perception of the balance method and demonstrates the procedure for determining temporary differences. Methods. For the study, we used the methods of analysis, synthesis, observation, comparison, and other general scientific methods. Results. The article justifies the clarification of permanent differences from the position of accounting categories. It offers an original approach that helps visually classify temporary differences. The formalization of the balance method helped identify the logic of its reflection in accounting statements. Conclusions and Relevance. To ensure that accounting is not distorted due to the impact of taxation, it is necessary to develop a unified conceptual framework, as well as develop existing methods and introduce new ones that do not contradict the public concept of interaction between accounting and tax accounting. The research results are intended for training, scientific and practical activities of specialists in the field of accounting and audit, as well as students studying under this program, in order to study the features of applying the balance method for accounting for deferred taxes.

scholarly journals Deferred Tax Accounting Concepts and Their Bond to the Accounting Ideologies

2021 ◽  
Vol 8 (4) ◽  
pp. 34-50
Author(s):  
A. A. Aksent’ev
Keyword(s):  
Balance Sheet ◽  
Financial Accounting ◽  
Corporate Management ◽  
Controversial Issues ◽  
Deferred Taxes ◽  
Accounting Standard ◽  
Domestic Practice ◽  
Important Object ◽  
Deferred Tax ◽  
Tax Accounting

Deferred taxes are an important object of accounting observation to judge the degree of discrepancies between financial and tax accounting. Meanwhile, the information discloses to users the effects arising from the tax planning tools usage for corporate management and forecasting cash outflows associated with the payment of income tax in the future. The paper formalized two concepts of accounting for deferred taxes in the form of models: temporary and timing differences associated with accounting ideologies. The author ha structured the logic of reflecting deferred taxes on accounting accounts using the balance sheet and “cost” methods. Analysis of foreign experience and domestic practice made it possible to conclude that there are controversial issues on the assessment of deferred taxes in reporting, including at present value. Also, the author revealed discrepancies in Russian Accounting Standard (PBU) 18/02 which were conceptually different from a similar international standard and conflicting with it in a number of theoretical and methodological positions. The research results are aimed at scientific and practical workers in the field of financial accounting, taxation and audit.

scholarly journals The impact of the deferred tax adjustment on the Economic Value Added (EVA) measure

2017 ◽  
Vol 14 (3) ◽  
pp. 227-242
Author(s):  
Melissa Naicker
Keyword(s):  
Quantitative Research ◽  
Economic Value ◽  
Value Added ◽  
Secondary Data ◽  
Research Problem ◽  
Economic Value Added ◽  
Deferred Taxes ◽  
Economic Values ◽  
Deferred Tax ◽  
The Impact

Economic Value Added (EVA) is a value-based accounting measure used by companies to measure the amount of value created for shareholders. EVA requires the conversion of accounting values to economic values. This conversion process is known as the EVA adjustment. If accounting values are not converted to economic values, the value of the EVA can be distorted. Previous studies have shown that companies are experiencing difficulties in implementing EVA adjustments. To reduce these difficulties, companies have decided to limit their EVA adjustments to ten or even fewer. The research problem is that if the appropriate adjustments are not made, an inaccurate EVA measure will be calculated. The aim of the research is to measure whether deferred taxes impact EVA. The study is conducted within a quantitative research paradigm. Secondary data analysis was carried out on JSE-listed food producers over a seven-year period, from 2004 to 2010. The unadjusted EVA was compared to the adjusted EVA measure to determine the before and after effects of deferred taxes on EVA. The findings of the study revealed that deferred taxes either understated or overstated the value of the EVA during the period 2004–2010. In addition, the results from the regression analysis revealed an overall significance for all deferred tax predictors. The results from the study showed that deferred tax had a significant impact on the value of EVA. Therefore, the study recommends that companies implement the deferred tax adjustment on EVA.

scholarly journals Deferred Tax Accounting for SMEs: Modified Income Statement Approach

2020 ◽  
Vol 3 (1) ◽  
pp. 31-47
Author(s):  
CA. (Dr.) Anand J Banka
Keyword(s):  
Balance Sheet ◽  
The Other ◽  
Unique Contribution ◽  
Deferred Taxes ◽  
Comprehensive Income ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
Deferred Tax ◽  
Temporary Difference ◽  
Tax Accounting

Purpose: Accounting for income tax under International Financial Reporting Standards (‘IFRS’) is dealt with in IAS 12 Income Taxes. It is often said that users of financial statements do not find information produced in accordance with IAS 12 useful. This is a serious problem because for many businesses tax is one of the largest expenses. In some cases, preparers find the requirements of IAS 12 difficult to apply in practice. Its requirements are said to be unclear, and preparers sometimes question the relevance and understandability of the information that is provided in accordance with the standard. The IFRS for SMEs currently require use of balance sheet approach for accounting of deferred taxes. In India, the Institute of Chartered Accountants of India (ICAI) – the apex standard-setting body in India, is formulating revised accounting standards for SME’s in India. This article examines an alternative to the balance sheet approach which is less complicated and easy to implement.[Reviewer1] [AB2] Methodology: This article proposes a new method i.e. Modified Income Statement Approach. This method is a mix of income statement approach and balance sheet approach, as it requires recognition of deferred taxes using temporary difference approach but calculated using income statement and the other comprehensive income (in effect, Comprehensive income statement). Modified Income Statement Approach requires comparison of tax expense with the underlying related income and expenses so that they are recognized in the same period. In doing so, it also considers income and expenses recognized in the income statement as well as the Other Comprehensive Income. Hence, this approach is more of temporary difference approach but applied by using income statement method. It covers all items of timing differences and most items of temporary differences. The SMEs have less complicated structures and transactions. Also, in many countries, including India, there exists no concept of tax balance sheet. Hence, it would be worthwhile to ease-out the deferred tax accounting for SMEs. The hypothesis is that application of modified income statement approach can result in similar outcome as the balance sheet approach.Findings: A survey of 50 top companies in India was conducted. The results show that 60% of the companies would have recognized the same deferred tax asset/ liability under both the methods i.e. modified income statement approach and balance sheet approach. Balance 40% had some minor differences, but such transactions may be less frequent for SME. On an average, the impact of using modified income approach as against balance sheet approach is a mere 4%. The only items not covered by the modified income statement approach as against the balance sheet approach are Fair valuation of assets/ liabilities on business combination, Compound financial instrument and the existence of undistributed profits of subsidiaries, branches, associates and joint arrangements[Reviewer3] .[AB4] Unique contribution to theory, practice and policy: [Reviewer5] [AB6] To balance out the cost and benefits of implementing an accounting standard as per the framework, it is critical that SME’s use a simpler and less complicated method which is easy to understand and implement. Modified income statement approach is easy to apply and not complicated or technical to understand. In India, companies are used to calculating deferred tax using income statement approach. Hence, this will be a small change from the existing approach, while achieving the objectives of the balance sheet approach. Hence, modified income statement approach seems to be an appropriate method for SMEs.

scholarly journals The impact of the deferred tax adjustment on the EVA measure for JSE-listed food producers and retailers in South Africa

2015 ◽  
Author(s):  
◽  
Melissa Naicker
Keyword(s):  
Quantitative Research ◽  
Economic Value ◽  
Value Added ◽  
Secondary Data ◽  
Deferred Taxes ◽  
Economic Values ◽  
After Effects ◽  
Before And After ◽  
Deferred Tax ◽  
The Impact

Economic Value Added (EVA) is a value based accounting measure used by companies to measure the amount of value created for shareholders. Accounting values derived from company annual financial statements (AFS), are used to calculate EVA. EVA requires the conversion of accounting values to economic values. This conversion process is known as the EVA adjustment. If accounting values are not converted to economic values, the value of the EVA can be distorted. Previous studies have shown that companies are experiencing difficulties in implementing EVA adjustments. To reduce these difficulties, companies have decided to limit their EVA adjustments to ten or even fewer. The problem is that if the appropriate adjustments are not made, an inaccurate EVA measure will be calculated. The aim of the research was to measure the impact of deferred taxes on the EVA measure. The study was conducted within a quantitative research paradigm. Secondary data analysis was carried out on JSE-listed Food producers and Retailers over a seven-year period, from 2004 to 2010. The unadjusted EVA was compared to the adjusted EVA measure to determine the before and after effects of deferred taxes on EVA. The findings of the study revealed that deferred taxes either understated or overstated the value of the EVA during 2004 to 2010. In addition, the results from the regression analysis revealed an overall significance for all deferred tax predictors. The regression results showed that deferred taxes significantly impacted the value of EVA. The study recommends that companies implement the deferred tax adjustment on the EVA measure.

scholarly journals THE INFLUENCE OF TAX DIFFERENCES ON THE INDICATORS OF FINANCIAL RESULTS OF BUSINESS ENTITIES: IDENTIFICATION AND ACCOUNTING

2021 ◽  
Author(s):  
Oksana Ponomarenko ◽  
Nataliya Kantsedal
Keyword(s):  
Income Tax ◽  
Economic Space ◽  
Deferred Tax Assets ◽  
Tax Legislation ◽  
Special Rules ◽  
Business Entities ◽  
Deferred Tax ◽  
Recognition And Response ◽  
The Impact ◽  
Tax Accounting

The article establishes the measure and direction of the influence of tax differences on the indicators of financial results of business entities and outlines approaches to the construction of an adequate accounting mechanism for income tax collection processes. An analysis of the impact on the financial result of a number of tax differences arising from typical business transactions: accrual of depreciation, disposal of an object of fixed assets, etc. It was proved that in the economic space of Ukraine there was no completion of the processes of final implementation of the simplification of the determination of the object of taxation by income tax of legal entities by synchronizing the indicators of "accounting" and "tax" profit. Measures implemented with the introduction of the Tax Code to harmonize the regulatory framework of accounting and tax accounting for taxation of profits of enterprises were analyzed. Details are given of the characteristics of income recognition for tax purposes by date and special rules for income recognition after the abolition of the category "gross income". It was established that the implementation of tax legislation regarding financial results is carried out by means of recognition and response to the presence of tax differences. Today, there are differences in the accrual of depreciation of non-negotiable assets with respect to financial performance; differences from the formation of reserves and collateral, differences in transactions for the sale or disposal of securities; Differences from financial transactions. The article discloses the essence of methodological approaches to calculating tax differences for such operations. The conclusion is justified that crisis phenomena in the country's economy and the impact of the pandemic on the global economic space actualize the need to reflect not only real, but also potential assets and liabilities, in particular deferred tax assets and deferred tax liabilities. The introduction of new documentary forms of accounting for tax differences and separate income and expenditure accounts for tax purposes can also be considered as areas of improvement of income tax accounting.

scholarly journals The Income Tax Accounting Controversy: A Matter Of Perspective

2011 ◽  
Vol 13 (4) ◽  
pp. 107
Author(s):  
Joseph C. Rue ◽  
Ara G. Volkan
Keyword(s):  
Income Tax ◽  
Income Taxes ◽  
Individual Event ◽  
Flow Through ◽  
Simultaneous Use ◽  
Definition Of ◽  
The Individual ◽  
Accounting For Income Taxes ◽  
Selection Of ◽  
Tax Accounting

<span>The study examines SFAS No. 96 and SFAS No. 109 in the context of the unit problem. The unit problem involves the selection of the appropriate perspective for applying measurement and recognition conventions to the phenomenon of interest. From an individual event perspective, the FASBs conclusions regarding liability recognition are inconsistent with their definition of a liability found in State of Finance Accounting Concepts No. 6. In addition, the use of inconsistent perspectives by the SFAS No. 96 and SFAS No. 109 create disagreements with the Boards positions. The simultaneous use of both the individual and aggregate perspectives as the basis of the Boards decisions is the source of these disagreements. The study argues that the income tax accounting issue should be viewed from an aggregate perspective and concludes that the flow through method of accounting for income taxes should be adopted.</span>

Accent Policy and Accent Modification Enterprises as Potential Indicators of Intercultural Power Relations: A Call for an Updated Research Agenda

2013 ◽  
Vol 3 (1) ◽  
pp. 22-33 ◽  
Author(s):  
Brynne D. Ovalle ◽  
Rahul Chakraborty
Keyword(s):  
International Relations ◽  
Identity Construction ◽  
Social Theory ◽  
Power Relations ◽  
Linguistic Diversity ◽  
Cultural Organization ◽  
Using Data ◽  
The Individual ◽  
The Impact ◽  
The Relationship

This article has two purposes: (a) to examine the relationship between intercultural power relations and the widespread practice of accent discrimination and (b) to underscore the ramifications of accent discrimination both for the individual and for global society as a whole. First, authors review social theory regarding language and group identity construction, and then go on to integrate more current studies linking accent bias to sociocultural variables. Authors discuss three examples of intercultural accent discrimination in order to illustrate how this link manifests itself in the broader context of international relations (i.e., how accent discrimination is generated in situations of unequal power) and, using a review of current research, assess the consequences of accent discrimination for the individual. Finally, the article highlights the impact that linguistic discrimination is having on linguistic diversity globally, partially using data from the United Nations Educational, Scientific and Cultural Organization (UNESCO) and partially by offering a potential context for interpreting the emergence of practices that seek to reduce or modify speaker accents.

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