Article Abstract:
Guidelines are presented for understanding and applying the new income tax rules set forth in Financial Accounting Standard (FAS) number 96. Concepts that need to be understood before adopting the new statement are: temporary versus timing difference identification, and permanent differences. FAS 96's requirements for recognizing deferred tax liabilities and assets are discussed, and the steps needed to comply with the requirements. Two special problems that most accountants will confront in applying the standard are tax rate changes and financial statement presentation. Other issues discussed include the disclosure and transition rules of the new standard.
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Article Abstract:
After four years of studying proposed changes to tax accounting methods, the Financial Accounting Standards Board (FASB) has issued an exposure draft recommending that comprehensive tax allocation be retained. The FASB has also recommended that the standard method for reporting deferred tax balances should be the liability method, rather than the deferral method. Although there are shortcomings to comprehensive tax allocation, such as its inconsistency and lack of conformity to international standards, the evolution of government tax policy in the 20th century presents compelling reasons for retaining comprehensive tax allocation.
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Article Abstract:
The need for financial reporting that is as objective and standardized as possible is often at odds with the needs of management accountants. The Financial Accounting Standards Board (FASB) is sensitive to this conflict between financial reporting and management accounting. FASB changes accounting standards only when the benefits to the users of financial statements outweigh the cost of adapting to new standards for the reporting companies. FASB is also careful to ensure that accounting standards reflect economic realities. The FASB board assesses the economic consequences of proposed changes before adopting new standards.
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