Deferred-tax accounting under the replacement-value theory

Abstract

In the Dutch literature on deferred taxes, the problem of the presentation of income taxes in the case of a revaluation of assets is perhaps the question most discussed in this field. A traditional and rather widespread view was that where the value at which an asset is stated in the accounts is written up on a revaluation, provision should be made for the tax rate times the amount of the revaluation in order to present a fair estimate of value. Since the publication of this opinion by a study-committee of the Dutch Institute of Accountants¹ in 1962, there has been much discussion in the Dutch literature on the ‘Reserve for future taxation on account of revaluation’ as the amount of deferred tax arising on an upward revaluation of assets was called by this study-committee.