The Income Tax Accounting Controversy: A Matter Of Perspective

Abstract

<span>The study examines SFAS No. 96 and SFAS No. 109 in the context of the unit problem. The unit problem involves the selection of the appropriate perspective for applying measurement and recognition conventions to the phenomenon of interest. From an individual event perspective, the FASBs conclusions regarding liability recognition are inconsistent with their definition of a liability found in State of Finance Accounting Concepts No. 6. In addition, the use of inconsistent perspectives by the SFAS No. 96 and SFAS No. 109 create disagreements with the Boards positions. The simultaneous use of both the individual and aggregate perspectives as the basis of the Boards decisions is the source of these disagreements. The study argues that the income tax accounting issue should be viewed from an aggregate perspective and concludes that the flow through method of accounting for income taxes should be adopted.</span>

Continuing Case Against Inter-Period Tax Allocation

“…The accounting process involves the identification, grouping and measurement of what are believed to be relatively homogeneous events. If events are not strictly homogeneous problems arise in selecting attributes of the group or class portrayed by the accounting process (Colley, Rue, and Volkan, 2004;Rue and Volkan, 1997). Some may take a specific or individual perspective that examines the attributes of one member of the group and assumes that those attributes may be generalized to the other members.…”