Accounting for income taxes: early adoption issues

• Published in: Australian accounting review Vol. 17; no. 3; pp. 68 - 74
• Main Authors: McNicholas, Patty, Wyatt, Kim
• Format: Journal Article
• Language: English
• Published: Melbourne Australian Society of Certified Practising Accountants 01-11-2007
• Subjects: AASB 1020; Accounting standards; Annual reports; Australian Accounting Standards Board; Balance sheets; Company tax; Compliance; Corporate income tax; Disclosure (Accounting); Exposure drafts; Financial reporting; Financial statements; Income taxes; International accounting standards; International Accounting Standards Board; International finance; Qualitative research; Statistical analysis; Studies; Tax allocation; Taxation; Australia
• ISSN: 1035-6908; 1835-2561

A study investigates whether the revised AASB 1020, Income Taxes, was adopted early by Top 100 publicly listed companies in Australia between 2000 and 2004. It was found that only three of the Top 100 publicly listed companies, by capitalization, in Australia had chosen to early-adopt the balance-sheet method of accounting for income taxes, despite a lead time of five years. The introduction of the tax consolidation regime and the impending introduction of the A-IFRSs on January 1, 2005, also influenced the decision to early-adopt AASB 1020. Companies had also assessed the costs versus benefits (Fields et al 2001) of adopting the balance-sheet method. In regard to adopting accounting standards before the mandatory implementation date, the study indicates that managers will choose to early-adopt a new or revised standard only if there is a material benefit on the company's financial reports or to their accounting practices.