AN EMPIRICAL ANALYSIS OF DEFERRED TAX BALANCES FROM A STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT PERSPECTIVE.

摘要

The purpose of this dissertation was to investigate the validity of the concept of interperiod tax allocation by providing empirical evidence concerning the behavior of deferred tax balances generated through recognition of timing differences. The concept of comprehensive interperiod tax allocation rests on the assumptions that timing difference reversals occur, and taxes previously deferred are paid. If deferred tax balances behave as though reversals do not occur, a corporation is seemingly in a permanent deferral state. As such, taxes once deferred are not paid. Under such conditions, the existence of a liability is questionable, and so is the charge against income for deferred income tax expense.; The results show that, in terms of the FASB's definition of a liability, deferred tax credit balances violate the 'present obligation' stipulation in that there is no probable future cash payment. The chance that, in any given year, a firm will experience declines in deferred tax credits due to timing difference reversals is, at best, reasonably possible. As a result, deferred tax credit balances more closely resemble contingent liabilities the ultimate realization of which depends upon the occurrence of future events.; Therefore, if there is no liability, that is, if these amounts are never paid, recognition of deferred income tax expense is invalid. In addition, an examination of three alternative specifications of income (pretax income, after-tax income with deferrals, and after-tax income without deferrals) showed that the recognition of deferred income tax expense does not create a more stable income number.