Income Taxes: Objective Values or Subjective Values as They Result from Financial Statements that Contain Subjective Data or Values Determined Subjectively by Financial Reporting Preparers?

Maria Silvia Avi

doi:10.22158/jepf.v7n5p91

Abstract

Research on more than 1500 Italian companies from 2016 to 2019 shows that the inclusion of tax values in financial reporting without any economic content is a widespread accounting practice. Tax interferences in financial reporting have various motivations and prove consequences both inside and outside the company. In the following pages, we will illustrate the results of the analysis carried out, the motivations leading to the incorrect accounting behaviour of the implementation of tax interferences and the consequences resulting from this widespread practice. It should be noted that tax interference causes problems both inside and outside the company. Such tax contamination of financial reporting affects the rights of third parties outside the company, and creates the conditions for challenges to financial reporting due to invalidity of the document. It also creates a basis for incorrect accounting data that can lead to wrong decisions by management.

Highlights

Research on more than 1500 Italian companies from 2016 to 2019 shows that the inclusion of tax values in financial reporting without any economic content is a widespread accounting practice
If for any reason, the preparer of the financial report enters tax values in the balance sheet and the profit and loss, these documents are not true and correct. If these documents contain values that have no economic content and are only relevant for tax purposes, the income and assets shown in the financial reporting are not meaningful
Motivations and Consequences of Tax Interferences: Concluding Remarks As regards the reasons for the recognition in the balance sheet or profit and loss of tax items without any economic content or the distinction in financial reporting of values lower than those economically correct because the recognition of higher values would not have allowed the full deductibility of the value recorded, it can be stopped that can be traced to two major categories of reasons

Summary

Introduction

Research on more than 1500 Italian companies from 2016 to 2019 shows that the inclusion of tax values in financial reporting without any economic content is a widespread accounting practice. Tax interferences in financial reporting have various motivations and prove consequences both inside and outside the company. We will illustrate the results of the analysis carried out, the motivations leading to the incorrect accounting behaviour of the implementation of tax interferences and the consequences resulting from this widespread practice. It should be noted that tax interference causes problems both inside and outside the company Such tax contamination of financial reporting affects the rights of third parties outside the company, and creates the conditions for challenges to financial reporting due to invalidity of the document. It creates a basis for incorrect accounting data that can lead to wrong decisions by management. Financial reporting, truthfulness, fairness and understandability, tax contamination of financial reporting, inclusion of tax items in financial reporting, tax interferences in financial reporting www.scholink.org/ojs/index.php/jep

Objectives

Results

Conclusion