Accounting for future tax assets and liabilities under CICA handbook Section 3465 (ABSTRACT)
published: 2003 | Research publication | Refereed Journals - Accounting
Zeng, T. (2003). "Accounting for future tax assets and liabilities under CICA handbook Section 3465". Review of Accounting & Finance, 2(3), 43-66.
ABSTRACT: This paper explores the value relevant information of future income taxes under The Canadian Institute of Chartered Accountants (CICA) handbook section 3465. CICA handbook section 3465 requires Canadian companies to use the asset and liability method to account for income taxes. Consistent with prior studies, this paper shows that future tax assets are positively associated with share prices, suggesting that they are valued as assets. In addition, this paper explores what determines the valuation of future tax assets and liabilities. It is argued that future tax assets are more (less) valuable if (no) sufficient future income will be generated in the near future to utilize these tax assets; future tax liabilities will reduce share price more (less), if there is a higher (lower) likelihood of reversal in the short run.
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revised Jan 18/05
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