Abstract
A discussion of how to deal with taxation in financial statements must begin with some consideration of what it is that is to be accounted for. Although it might be supposed that this is a simple question, and that taxation is a business expense to be dealt with in the same manner as any other cost, it has certain characteristics which set it apart from other costs and which might justify a different treatment. These characteristics include the fact that tax payments are not made in exchange for any goods or services and the fact that the business has no say in whether or not the payments are to be made. It is held by some that these elements mean that taxation is more in the nature of a distribution than an expense; in essence that the government is a stakeholder in the success of the business and participates in its results (generally in priority to other stakeholders).
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References
Such a distinction was made in the original version of SSAP 15 Accounting for deferred taxation, ASC, October 1978 (see 2.2.4).
ED 49, Reflecting the substance of transactions in assets and liabilities, ASC, May 1990, para. 21
TR 773, The Use of Discounting in Financial Statements, ICAEW, 1990, para. 38.
SSAP 15, Accounting for deferred tax, ASC, Revised May 1985, para. 16.
SSAP 6, Extraordinary items and prior year adjustments, ASC, Revised August 1986, para. 38.
FRED 1, The structure of financial statements — reporting of financial performance, ASB, December 1991, paras. 20 and 21.
Ibid., paras 19 and 21.
ED 12, The treatment of taxation under the imputation system in the accounts of companies, ASC, May 1973.
ED 11, Accounting for deferred taxation, ASC, May 1973.
SSAP 11, Accounting for deferred taxation, ASC, August 1975.
ED 18, Current cost accounting, ASC, November 1986, paras. 244–257.
ED 19, Accounting for deferred taxation, ASC, May 1977.
Original SSAP 15.
ED 33, Accounting for deferred tax, ASC, June 1983.
SSAP 15, Accounting for deferred tax, ASC, Revised May 1985.
SSAP 5, Accounting for value added tax, ASC, April 1974.
ED 10, Accounting for Value Added Tax, ASC, May 1973.
SSAP 5, para. 8.
Ibid., para. 9.
ED 28, Accounting for Petroleum Revenue Tax, ASC, March 1981.
SSAP 8, The treatment of taxation under the imputation system in the accounts of companies, August 1974, ASC, para. 24.
Ibid., para. 20.
Ibid., para. 13.
Ibid., para. 25.
Ibid., para. 22. It should be noted that changes in tax legislation since SSAP 8 was issued have meant that unrelieved overseas taxation will not arise from the payment or proposed payment of dividends. Consequently, SSAP 8’s requirement for the separate disclosure of such amounts is now redundant.
Ibid., para. 23.
Ibid., para. 9.
SSAP 15, para. 1.
Ibid., para. 2.
Ibid., para. 12.
Ibid., para. 14.
Ibid., para. 17.
Ibid., para. 18.
Ibid., para. 19.
Ibid., para. 20.
Ibid., para. 21.
Ibid., para. 23.
Ibid., paras. 24–26.
Ibid., Appendix, para. 4.
Ibid., paras. 27 and 28.
Ibid., Appendix, para. 4.
Ibid., para. 29.
Ibid., para. 30.
Ibid., Appendix, para. 14.
Ibid., Appendix, para. 15.
Ibid., para. 31.
Ibid., para. 32.
Ibid., paras. 33 and 34.
SSAP 6, para. 37.
FRED 1, para. 20.
SSAP 15, para. 35.
Ibid., para. 36.
FRED 1, para. 46
SSAP 15, paras. 37 and 40.
Ibid., para. 41.
Original SSAP 15, para. 33.
SSAP 15, para. 38.
Ibid., para. 39.
Ibid., para. 42.
Ibid., para. 43.
Ibid., para. 44.
FRS 2, Accounting for subsidiary undertakings, ASB, July 1992, para. 54.
CA 85, Sch. 4, para. 54(1).
Ibid., para. 54(2).
FRED 1, para. 22.
CA 85, Sch. 4, para. 8 Profit and loss account formats and para. 54(3).
Ibid., para. 8 Balance sheet formats.
Ibid., para. 46.
Ibid., para. 47.
SSAP 15, Appendix, para. 4.
Accountants Digest No. 174, ICAEW, A Guide to Accounting Standards — Deferred Tax, Summer 1985.
SSAP 15, Appendix, para. 14.
CA 85, Sch. 4, para. 54(2).
SSAP 15, para. 43.
SSAP 8, para. 20(c).
SSAP 15, para. 31.
Ibid., para. 32.
SSAP 8, para. 7.
SSAP 15, Appendix, para. 17.
SSAP 8, para. 7.
SSAP 17, Accounting for post balance sheet events, August 1980, Appendix, item (g) of examples of adjusting events.
Accountants Digest No. 174, p. 12.
SSAP 15, para. 20.
Ibid., Appendix, para. 11.
Ibid., para. 44.
FRS 2, para. 54.
ED 33, para. 35.
ED 53, Fair value in the context of acquisition accounting, ASC, July 1990, paras. 78 and 79.
E33, Accounting for Taxes on Income, IASC, January 1989.
APB 11, Accounting for Income Taxes, AICPA, December 1967.
SFAS 96, Accounting for Income Taxes, FASB, December, 1987.
SFAC No. 6, Elements of Financial Statements, FASB, December 1985, paras. 25 and 35.
SFAS 109, Accounting for Income Taxes.
Ibid., paras. 6 – 9.
Ibid., para. 13.
Ibid., para. 18.
Ibid., para. 17.
Ibid., para. 22.
Ibid., para. 41.
APB 16, Business Combinations, Accounting Principles Board, August 1970, para. 89.
ED 53, paras. 78 and 79.
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Davies, M., Paterson, R., Wilson, A. (1992). Taxation. In: UK Gaap. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12998-0_18
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