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The ‘New’ Deferred Tax: a Comment on AARF Discussion Paper No. 22 ‘Accounting for Income Tax’
Author(s) -
Sidhu Baljit K.
Publication year - 1996
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.1996.tb00006.x
Subject(s) - accounting , deferred tax , balance sheet , write off , income statement , income tax , financial statement , business , statement (logic) , economics , state income tax , foundation (evidence) , actuarial science , public economics , gross income , tax reform , political science , law , audit
Discussion Paper No. 22 Accounting for Income Tax (DP 22), issued by the Australian Accounting Research Foundation, represents significant change through its advocacy of a “balance sheet” rather than the currently prescribed “income statement” approach for the recognition of deferred tax assets and liabilities. This paper clarifies the differences between the two methods and illustrates their effects on financial statements. It evaluates DP 22's arguments in favour of the balance‐sheet approach and provides some guidance on the “usefulness” of deferred tax numbers. The paper concludes that the logical inconsistencies in DP 22, coupled with the available evidence on income‐tax allocation, suggest that we should be cautious in making changes to current reporting requirements.