Background to the problem

Abstract

It might seem superfluous to write a study on the incorporation of deferred and anticipated income taxes in companies’ financial statements, or on tax-effect accounting. There is a substantial literature on this subject and it might seem questionable how much scope there is for further work. However, much remains to be done, because a large proportion of the literature, mainly consisting of papers, is very fragmentary and there is no systematic treatment. Even in more comprehensive studies like the recommendations of professional accountancy bodies (e. g. the U.S. A.P.B.-opinion no. 11 of 1967, the British S.S.A.P. no. 11 of 1975 and no. 15 of 1978 and the I.A.S.C. International Accounting Standard no. 12 of 1979) or in more extensive studies (partially based on those recommendations) like Stitt (1976), Black (1966) or Finnie (1973) — see bibliography —, a systematic treatment is not offered. What is mainly missing is the discussion of the valuation, nature, nomenclature and classification of differences between book income and taxable income. Most of the literature focuses on the calculation side of the problem and on problems arising when tax rates change. We describe the question at issue briefly as the problem of deferred taxation¹, since this is more important than anticipated taxation.