scholarly journals Financial reporting on income tax in Serbia and Croatia: An empirical analysis

2020 ◽  
Vol 68 (5-6) ◽  
pp. 330-340
Author(s):  
Stefan Vržina ◽  
Vladimir Obradović ◽  
Jasmina Bogićević
Keyword(s):  
Financial Reporting ◽  
Income Tax ◽  
Deferred Tax Assets ◽  
Reporting Practices ◽  
Economic Decision Making ◽  
National Environment ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Relevant Regulation

The paper examines the quality of financial reporting on income tax in Serbia and Croatia in order to determine the extent to which disclosed information on income tax in these countries is useful for economic decision making. The research based on financial statements of listed and non-listed companies for 2016 reveals that disclosed information on the income tax is not entirely in accordance with the relevant regulation. Therefore, there is a significant room for improvement of income tax financial reporting practices in both countries. The quality of disclosed income tax information is not related to the presence of companies in the stock market, as capital markets in Serbia and Croatia do not provide strong incentives for disclosing adequate information on income tax. The research also reveals significant differences in the prevailing sources of deferred tax assets and deferred tax liabilities between Serbia and Croatia, which indicates that the income tax financial reporting is conditioned by the specifics of the national environment.

scholarly journals DEFERRED INCOME TAX: IMPACT ON FINANCIAL AND TAX REPORTING (THE PRACTIСE OF UKRAINE AND GERMANY)

2021 ◽  
Vol 4 (39) ◽  
pp. 138-148
Author(s):  
O. Malyshkin ◽  
S. Rohoznyi ◽  
O. Yarmolitska ◽  
Yu. Ostapenko
Keyword(s):  
Financial Reporting ◽  
Income Tax ◽  
Jel Classification ◽  
International Standards ◽  
Tax Base ◽  
Deferred Tax Assets ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Tax Reporting ◽  
The Impact

Abstract. Income taxation is typical for most countries with their own peculiarities. In the practice of the Ukrainian enterprises, there is a lack of relationship between accounting and tax accounting to reflect the deferred tax asset and deferred tax liability in the reporting. The purpose of the article is to analyze the income tax in terms of its calculation by the international standards and identify key tax differences. The authors proposed to formulate the definitions of the current income tax which should be understood as the amount of income taxes payable (reimbursed) on taxable profit (tax loss) for the period and expenses (income) from income tax which should be understood as the total amount included in the determination of profit or loss for the period in accordance with current and deferred taxes. This interpretation of the definitions will help better understand the concepts in accounting and taxation. The tax base of assets and the tax base of liabilities are given and substantiated. The temporary differences were identified by authors. The example of definition of Deferred tax liabilities and Deferred tax assets, the order of their reflection in the report on financial results (about the total income) and disclosure in the Notes to the financial reporting is considered and analyzed. The impact on the indicators of the Income Tax Return is investigated. There is no direct impact of the amount of the Deferred tax assets / Deferred tax liabilities according to the current algorithm for the object of taxation, which is determined by tax legislation. The conclusions are made about the importance of determining of Deferred tax liabilities and Deferred tax assets, which directly affects the amount of net profit. The result of the study was confirmation of the hypothesis concerning different orientation of norms of the legal documents on the display of information in the forms of the financial and tax reporting. Such differences are related to the different requirement to the reporting by the modern stakeholders. Keywords: income tax, deferred tax, tax asset, tax liability, reporting. JEL Classification M40, М41, М48 Formulas: 0; fig.: 2; tabl.: 5; bibl.: 16.

Audit Firms, Deferred Taxation and Financial Reporting

2016 ◽  
Vol 3 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Evangelos Chytis ◽  
John Filos ◽  
Periklis Tagkas ◽  
Maria Rodosthenous
Keyword(s):  
Financial Reporting ◽  
Banking Sector ◽  
Stock Exchange ◽  
Balance Sheets ◽  
Deferred Tax Assets ◽  
Audit Firms ◽  
Athens Stock Exchange ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Audit Reports

The purpose of this paper is the sectoral analysis and evaluation of the external audit reports in relation to the amounts of deferred taxes on the balance sheets of listed companies in the Athens Stock Exchange (ASE). External auditors participate significantly in the preparation of financial reporting, reducing agency problems and aiding acceptance of such information by the users as reliable. The “unqualified” audit reports correspond to more than two thirds of the total, while in the banking sector there is no “unqualified” (ie without even issue of ‘emphasis') Audit Report after 2011. More than two thirds of Deferred Tax Assets - including those from Loss Carryforwards - (DTA), Deferred Tax Liabilities (DTL), and Deferred Tax in the Income Statement appear on the Balance Sheets of the companies audited by the Big 5. Audit firms and supervisory authorities do not seem to have made satisfactory evaluation and exploitation of this information.

Valuation of the Firm in the Presence of Temporary Book-Tax Differences: The Role of Deferred Tax Assets and Liabilities

2000 ◽  
Vol 75 (1) ◽  
pp. 1-12 ◽  
Author(s):  
David A. Guenther ◽  
Richard C. Sansing
Keyword(s):  
Financial Reporting ◽  
Market Value ◽  
Cash Flows ◽  
Present Value ◽  
Deferred Tax Assets ◽  
Tax Deductions ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Future Cash Flows

This study uses an analytical model to investigate the value of the firm when there are temporary differences between when revenue and expense items are recognized for tax- and financial-reporting purposes. The model shows that deferred tax assets and liabilities transform book values of underlying liabilities and assets into estimates of the after-tax cash flows on which the firm's market value is based. The analysis shows that if tax deductions are taken on a cash basis, and if the underlying assets and liabilities are recorded at the present value of their associated future cash flows, then the value of deferred tax assets and deferred tax liabilities is their recorded amount, regardless of when the asset will be realized or when the liability will reverse. If tax deductions are not taken when the expenditure is made (e.g., depreciation) or if underlying assets and liabilities are recorded at more than the present value of their associated future cash flows (e.g., warranty liabilities), then the market value of deferred tax assets and deferred tax liabilities is less than their recorded values. The value of the deferred tax account is independent of when that account will reverse.

Do Income Tax-Related Deficiencies in Publicly Disclosed PCAOB Part II Reports Influence Audit Client Financial Reporting of Income Tax Accounts?

2015 ◽  
Vol 91 (5) ◽  
pp. 1411-1439 ◽  
Author(s):  
Katharine D. Drake ◽  
Nathan C. Goldman ◽  
Stephen J. Lusch
Keyword(s):  
Financial Reporting ◽  
Income Tax ◽  
Income Taxes ◽  
Deferred Tax Assets ◽  
Quality Controls ◽  
Valuation Allowance ◽  
Tax Benefits ◽  
Deferred Tax

ABSTRACT Deloitte's 2007 PCAOB Part II report identifies, among other issues, concerns related to the audit firm's quality controls with respect to auditing income tax accounts. We investigate whether Deloitte's actions to remediate the PCAOB's concerns are associated with changes to their clients' financial reporting for income taxes. We find that Deloitte's clients increased the reported valuation allowance on deferred tax assets and increased the reported reserve for uncertain tax benefits (UTBs) in response to increased auditor scrutiny over income tax accounts. Additionally, we find that in subsequent periods, Deloitte's clients report valuation allowances and UTB balances that are not significantly different than other annually inspected auditors, consistent with Deloitte changing the quality controls related to audits of income tax accounts after the failed remediation of the 2007 Part II report.

scholarly journals Earnings Management Through Deferred Taxes Recognized Under IAS 12: Evidence From Pakistan

2014 ◽  
Vol 3 (1) ◽  
pp. 1-19
Author(s):  
Abdul Rafay Abdul Rafay ◽  
Mobeen Ajmal
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Relevant Information ◽  
Cash Flows ◽  
Deferred Taxes ◽  
Deferred Tax Assets ◽  
Operational Activities ◽  
Deferred Tax ◽  
Relevant Component

This study examines earnings management through deferred taxes calculated under the IAS 12 and its impact on firm valuation. The literature finds that book–tax nonconformity leads to better earning quality and a greater association between earnings and future expected cash flows. Given that Pakistan is a pioneering implementer of the International Financial Reporting Standards, our hypothesis is that the components of deferred tax disclosed under the IAS 12 provide value-relevant information to equity investors. We divide deferred tax components into three categories: those arising from (i) operational activities, (ii) investing activities, and (iii) financing activities. These are subdivided to ensure that no value-relevant component is aggregated with a nonvalue-relevant component, which might otherwise lead to an information slack. Our sample includes data on shariah-compliant companies listed on the Karachi Meezan Index (KMI-30). We find that deferred tax line items in firms’ balance sheets are reflected in market prices. Investors also tend to treat deferred tax line items (arising from operating, financing, and investing activities) differently. Furthermore, the value relevance is dissimilar for different components of deferred tax. Investors are wary of deferred tax assets and liabilities when pricing and are likely to penalize firms with a higher deferred tax position.

Decomposing Changes in Deferred Tax Assets and Liabilities to Isolate Earnings Management Activities

2004 ◽  
Vol 26 (s-1) ◽  
pp. 43-66 ◽  
Author(s):  
John D. Phillips ◽  
Morton Pincus ◽  
Sonja Olhoft Rego ◽  
Huishan Wan
Keyword(s):  
Earnings Management ◽  
Income Tax ◽  
Deferred Tax Assets ◽  
Using Data ◽  
Deferred Tax ◽  
Annual Earnings ◽  
Tax Expense ◽  
Footnote Disclosures

This paper provides evidence on the types of accounts that reveal earnings management activities. We build on Burgstahler and Dichev's (1997) evidence of earnings management to avoid an earnings decline and Phillips et al.'s (2003) findings that deferred tax expense (DTE) can be used to detect such earnings management. In particular, we investigate the relation between changes in annual earnings and changes in deferred tax asset and liability components using data hand-collected from firms' income tax footnote disclosures. Our evidence indicates that changes in the net deferred tax liability (DTL) component related to revenue and expense accruals and reserves can be used to detect earnings management to avoid an earnings decline. In addition, we build on Joos et al.'s (2003) results and partition our sample into firm-years with positive and negative changes in net DTLs and repeat our analyses. In contrast to the Joos et al. (2003) finding that DTE can be used to detect earnings management only for firm-years in which DTE is negative, we find that both subsamples reflect earnings management of revenue and expense accruals and reserves to report earnings increases.

The Development of Accounting and Financial Reporting Practices in Sri Lanka: An Exploratory Investigation

2019 ◽  
Vol 54 (02) ◽  
pp. 1950008
Author(s):  
Jayasinghe Hewa Dulige ◽  
Nadana Abayadeera ◽  
Muhammad Jahangir Ali ◽  
Paul Mather
Keyword(s):  
Sri Lanka ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Sri Lankan ◽  
Reporting Practices ◽  
Political Interference ◽  
Key Stakeholders ◽  
Exploratory Investigation ◽  
Chartered Accountants

In this paper, we examine the factors that influence the development of accounting and reporting practices in Sri Lanka in the backdrop of its political and economic environment. We find that the early days of accounting in Sri Lanka were heavily influenced by the British colonial system. Subsequently, its greatest influence was derived from the regulatory and institutional framework backed by local and British professional accounting bodies. We also interview key stakeholders to draw insights on how the institutional factors contribute to the development of financial reporting in Sri Lanka. We discover that the Institute of Chartered Accountants of Sri Lanka (ICASL) is a key player in developing and implementing accounting standards and the best financial reporting practices. We observe that although the Sri Lankan Government has undertaken many initiatives to improve the quality of financial reporting, monitoring and enforcing regulations remain weak partly due to political interference. Therefore, we suggest that strengthening the existing regulatory mechanisms will help to improve the reporting quality and build investor confidence.

Independent monitoring and review functions in a financial reporting context

2017 ◽  
Vol 25 (2) ◽  
pp. 268-290 ◽  
Author(s):  
Albertus Louw ◽  
Warren Maroun
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Financial Statements ◽  
Reporting Standards ◽  
Content Type ◽  
Reporting Practices ◽  
Financial Reporting Standards ◽  
Corporate Reporting ◽  
Independent Review

Purpose Independent monitoring and review bodies have become a defining feature of the professional accounting and auditing space. Exactly how these institutions function to improve the quality of the corporate reporting or audit function is, however, poorly understood. Consequently, the purpose of this study is to provide empirical evidence on how the activities of an independent review process functions on individual preparers, auditors and those charged with an organisation’s governance. Design/methodology/approach The study is an interpretive one. Data are collected using semi-structured interviews and analysed by the researchers. Findings The review function performed by an independent body results in companies being more aware of the need for compliance with the applicable financial reporting standards. Independent reviews also act as a process of examination which functions at the level of the individual accountant, auditor or director. These subjects of regulation report an added sense of accountability to their respective employer and profession and a heightened awareness of the need for high-quality corporate reporting. Research limitations/implications Independent monitoring and review bodies are not just symbolic displays which reassure uninformed users that the quality of financial statements are sound. Examination of financial statements and identification of non-compliance with the applicable financial reporting standards drive actual changes in reporting practices. Originality/value This study complements the predominantly positivist financial reporting research which does not deal with precisely how the work of regulatory bodies operates on the subjects of regulation. The research makes an important practical contribution by providing empirical evidence in support of laws and regulations which promote independent review of the accounting profession.

ACCOUNTING OF DEFERRED TAX ASSETS AND LIABILITIES: HISTORICAL EXCURSION AND MODERN REALITIES

2021 ◽  
Author(s):  
Ольга Височан ◽  
Тетяна Івасюк
Keyword(s):  
Income Tax ◽  
Historical Context ◽  
Current Position ◽  
Deferred Taxes ◽  
Accounting Standard ◽  
Deferred Tax Assets ◽  
Deferred Tax ◽  
Historical Methods ◽  
Algorithmic Process ◽  
Methodological Difficulties

The article considers the essence of deferred tax assets and liabilities and their reflection in the system of accounts and registers in the historical context. The periodization of the process of formation and development of the problem of deferred taxes in Ukraine with the use of normative and historical methods of cognition is carried out. The differences between permanent and temporary differences in tax profit (loss) and accounting profit (loss) are described. The approach to accounting for deferred taxes and their place in the reporting of enterprises using an algorithmic process is generalized. A detailed description of the current position of accounting for deferred taxes through the viewpoint of Ukrainian accounting standard 17 "Income Tax". Conclusions are made on the possibility of further research on the elimination of methodological difficulties in the allocation of certain tax differences to temporary or permanent.

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