Adjustment of Deferred Tax Balances in the Balance Sheet when Changing the Income Tax Rate: Methodological Aspects
( Pp. 243-256)

The purpose of this paper is to disclose the methodological aspects of adjusting deferred tax balances when the income tax rate changes. The paper analyses seven accounting standards (IAS 12; FASB ASC 740; FRS 102; DRS 18; AS 22; SSAP 12; FAS 18/02) in terms of regulation of requirements for accounting for the effect of changes in the income tax rate. Methodological peculiarities of distribution of the effect from change of the income tax rate by components of financial statements are characterised. It is established that at present modern accounting standards are based on the concept of liabilities, in connection with which deferred taxes are accounted for at the rate at which their recovery (reversal) is expected in the future. It has been determined that many foreign developers require the effect of changes in tax rates to be included in profit and loss due to the complexity of allocating deferred taxes to components of financial statements. The exceptions are IAS 12 and FRS 102, where the former permits and the latter sets out the requirement to make the designated allocation. The paper illustrates the problems associated with the application of different methodologies for allocating deferred taxes, including the effect of changes in the tax rate, to components of financial statements. The paper highlights the following controversial issue: how can a ‘net’ deferred tax asset be adequately allocated if it is negative in one component and positive in another? It is concluded that the wording used by the developers of IAS 12 is vague, in connection with which companies can at will allocate / not allocate the effect of changes in the tax rate, which is not proved in the framework of this study and should be considered in a separate paper. Prospects for the development of the research topic are to develop and clarify methods for reasonable allocation of deferred taxes to components of financial statements.

Aksentev A. A. Adjustment of Deferred Tax Balances in the Balance Sheet when Changing the Income Tax Rate: Methodological Aspects // ECONOMIC PROBLEMS AND LEGAL PRACTICE. 2025. Vol. 21. № 2. P. 243-256. (in Russ.) DOI: 10.33693/2541-8025-2025-21-2-243-256. EDN: OHUTKW

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income taxes; deferred taxes; change in tax rate; liability concept..