- Title
- A conceptual re-alignment of methodology underpinning tax effect accounting : An Australian exploration of the contemporary normalising effect
- Creator
- Morton, Elizabeth
- Date
- 2016
- Type
- Text; Thesis; PhD
- Identifier
- http://researchonline.federation.edu.au/vital/access/HandleResolver/1959.17/154200
- Identifier
- vital:11072
- Identifier
- http://library.federation.edu.au/record=b2684944
- Abstract
- This research examines the presence and effectiveness of the ‘normalising effect’, traditionally offered as the main justification for tax effect accounting’s (TEA) adoption. TEA can be seen as a technical facet of accounting practice, ‘normalising’ the timing differences between the accounting and taxation systems. That is, income tax is recognised according to when transactions are recognised for accounting purposes in order to ‘normalise’ reported profits, thereby reflecting an income statement focus. It has been contended that this will improve the usefulness of financial reports by ‘correcting’ misleading and ‘unreal’ fluctuations in income tax. Australia’s adoption of AIFRS in 2005 entailed a major conceptual re-alignment of the methodology underpinning TEA, moving away from the income statement focus in favour of a balance sheet focus. This implied a different normalisation emphasis. It is within this contemporary setting, based on a study of 90 companies over the two regulatory periods between 2002 and 2011 (AGAAP and AIFRS), that a quantitative measure of the presence and effectiveness of the normalising effect was undertaken, additionally considering the subsequent balance sheet impact. Effective normalisation was revealed during the AGAAP period, whilst only effective after the removal of loss makers during the AIFRS period. These findings suggest that the relaxation of recognition criteria under AIFRS may have had a meaningful impact on the effectiveness of the new standard. However, when normalisation was given a more narrow definition in light of prima facie tax, deferred taxes had a more substantial impact, particularly during the AIFRS period. Such findings are consistent with the notion thatTEA enables reported tax to be ‘as if’ it were a function of accounting, without a substantial build up on the balance sheet as a consequence. These findings have implications for evaluating the efficacy of TEA and comprehending the nature of contemporary financial statements.; Doctor of Philosophy
- Publisher
- Federation University Australia
- Rights
- Copyright Elizabeth Morton
- Rights
- Open Access
- Rights
- This metadata is freely available under a CCO license
- Subject
- Tax effect accounting; Australia; Contemporary normalising effect; Methodology
- Full Text
- Thesis Supervisor
- West, Brian
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