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

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.

Deferred Tax Accounting Concepts and Their Bond to the Accounting Ideologies

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.

Financial accounting for deferred taxes: a systematic review of empirical evidence

Deferred taxes—resulting from differences between financial and tax accounts—have been a long-standing, contentious issue in financial accounting regulation, practice, and research. Debates on concepts and standards have been accompanied by doubts around whether and the extent to which deferred taxes provide relevant information for financial statement users and are employed by firms to manage their earnings. This paper systematically reviews the body of empirical evidence that has emerged over the last three decades on deferred taxes in the fields of value relevance and earnings management. A bibliographic analysis and a narrative synthesis are presented within a thematic categorization framework. Key results indicate that existing research focuses on the US setting. There is substantial evidence for the value relevance of various deferred tax items but limited evidence that firms use deferred taxes to manage their earnings. The findings suggest implications for both future research and the regulatory debate.

EARNINGS AND FIRM VALUE: THE MODERATING IMPACT OF LARGE DEFERRED TAXES AND LARGE ACCRUALS IN INDONESIA

Deferred tax and accruals have the characteristic of causing reported earnings to be above or below normal. Both are permitted to be used by companies in financial reporting. This study examines whether large deferred taxes and large accruals have an impact on the relationship between earnings and firm value. Using a sample that includes 1938 company-year observations for the 2007−2017 periods listed on the Indonesia Stock Exchange (IDX), this study found that large positive deferred taxes with large positive accruals had weakened the relationship between earnings and firm value. In contrast to these results, a large negative deferred tax with a large negative accrual does not have an impact on the relationship between earnings and the firm value. This finding suggests that “liberal” accounting policies that cause reported “above normal” earnings have a negative effect on the association between earnings and firm value. However, “below normal” earnings resulting from “conservative” accounting policies do not affect the association between earnings and firm value. The uniqueness of this study is the incorporation of deferred taxes with accruals with variations in the form of positive versus negative and large versus small. The findings imply that the presentation of financial information with small deferred taxes and small accruals is more beneficial for investors compared to financial information with large positive deferred taxes and large positive accruals. However, results of this study indicate that large negative deferred taxes and large negative accruals, indicating conservative accounting, are not responded differently by investors.

Analisis Struktur Aktiva, Beban Pajak dan Struktur Keuangan pada Sektor Industri Tekstil dan Garmen yang Go Publik di Bursa Efek Indonesia

Structure of asset is determination of how much allocation for each component asset, either in current assets or in fixed assets. Tax expense is sum combined current and deferred taxes that are taken into account in determining the profit and loss for a period. Financial structure is way companies finance their assets. This study aims to know and analyze structure of assets, tax burden and financial structure in textile and garment industry sector Go Public in Indonesia Stock Exchange. Results showed that textile and garment industry sector has a high asset structure and tax burden.This high asset structure is seen in high fixed assets in this sector, so that is used as collateral for corporate debt. The high tax burden on this industry, greater profit from use of debt. Financial structure of this industry very high, because with use of debt as a very large capital, so risky for investors.

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

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.

Deferred Tax Accounting for SMEs: Modified Income Statement Approach

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.

FINANCIAL DISTRESS AND TAX MOTIVATION: THE EFFECT ON EARNINGS MANAGEMENT

When companies solve financial distress, there are efforts made by companies such as accounting methods, changing accounting estimation, policies, and shifting periods of costs or revenues. Companies also often carry out strategies in dealing with deferred taxes or tax payments, both of which are done is a form of earnings management This study aims to discuss the effect of financial distress and tax motivation on earnings management in transportation service companies approved in the Indonesia Stock Exchange in 2014-2018. Sampling using a purposive sampling technique. From a population of 35 companies, based on the criteria chosen 9 companies were selected as samples. Data processing using panel data regression method. Based on the selection model, the fixed effect is chosen as the analysis model to be used. The results of the study concluded that financial distress determines a significant positive effect on earnings management while tax motivation does not involve earnings management

Applying the updated PBU 18/02 Standard in the context of transition to Federal Accounting Standard FSBU 25/2018

Subject. This article considers the complex issues of the co-use of PBU 18/02 Corporate Income Tax Accounting and Federal Accounting Standard FSBU 25/2018 Accounting for Leases. Objectives. The article aims to analyze methodological issues related to the recognition of deferred taxes in a tenant's accounting with consideration to the differences in the reflection of lease operations in accounting and tax records. Methods. For the study, we used a systems analysis and generalization. Results. The article identifies a number of unresolved methodological issues relating to the provisions of the updated version of PBU 18/02 in the context of the transition to a new lease reflection procedure. Conclusions and Relevance. The article concludes that it is now appropriate to prepare methodological materials explaining and clarifying the practice of applying regulations on the reflection of deferred income tax on lease transactions. The results of the study can be used in scientific and practical activities, as well as to develop proposals to improve the methodology of Russian accounting, focused on convergence with modern international practices.