Question

Let's talk a little about the difference in tax and financial reporting and the impact IFRS could have. In the United States, in particular, fair presentation under GAAP sets the standards for financial accounting. GAAP is adjusted, if you will, to comply with tax accounting. More specifically, taxable profits must be adjusted from GAAP presentation to tax accounting in order to facilitate accurate tax reporting at year's end.

From an accounting perspective, do you think tax accounting and financial accounting should be uniform? I believe that is a huge leap considering that countries themselves are separated in terms of how accounting systems developed legally. On the one hand, you have micro-based, common law countries like the U.S., who have adopted fair presentation standards. On the other hand, are macro-based, code law countries whose accounting standards conform to tax legislation? I don't believe, under these separate set of circumstances, that uniformity will work internationally any more than one would expect diverse systems of government and capital markets to behave in one way. What are your thoughts?

Answer 1

WHEN WE TALK ABOUT ACCOUNTING PERSPECTIVE , THERE IS AN IMPORTANT IFRS (IAS 12 ) THAT TALKS ABOUT DEFERRED TAXES i.e DEFERRED ASSETS AND LIABILITIES WHICH IS CERTAINLY THERE FOR MATCHING CONCEPT , HENCE TAX AND ACCOUNTING INCOME ARE MATCHED AND ACCORDINGLY PROPER BOOKS ARE MAINTAINED AND PROPER ACCOUNTING IS DONE.

ALTHOUGH THERE IS NO UNIFORMITY IN TAX AND ACCOUNTING LAWS BUT THIS STANDARD AIMS TO BRING THE UNIFORMITY AND HENCE RATHER THAN COMPLICATING THE TAX AND ACCOUNTS IN THE NAME OF BRINGING UNIFORMITY , IT IS BETTER TO HAVE PROPER KNOWLEDGE OF THIS STANDARD AND THIS STANDARD SHOULD BE APPLIED WHENEVER NEEDED.