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Influence of Rules for Computing Corporate Income Tax on the Accuracy of Financial Statements of Lithuanian Companies

Influence of Rules for Computing Corporate Income Tax on the Accuracy of Financial Statements of... Abstract Companies in Lithuania have to follow Business Accounting Standards (BAS) when preparing their financial statements. Recording financial transactions according to BAS ensures that the information a company shares with potential lenders and investors gives a true and fair view of its business situation. However, the tax law prescribes its own set of accounting rules, which can result in a difference between what a business shows in financial statements and what it reports on its tax returns. This paper examines whether Lithuanian companies predominantly use tax accounting principles that migrate into their financial statements to create an inaccurate picture of business performance. The method of experts’ evaluation was chosen for that purpose. The results indicate that Lithuanian companies tend to heavily rely on accounting principles prescribed in corporate income tax law thus distorting information contained in financial statements. The paper contributes to the scarce literature on this issue of high relevance to both academics and practitioners. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scientific Annals of Economics and Business de Gruyter

Influence of Rules for Computing Corporate Income Tax on the Accuracy of Financial Statements of Lithuanian Companies

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Publisher
de Gruyter
Copyright
Copyright © 2016 by the
ISSN
2501-3165
eISSN
2501-3165
DOI
10.1515/saeb-2016-0105
Publisher site
See Article on Publisher Site

Abstract

Abstract Companies in Lithuania have to follow Business Accounting Standards (BAS) when preparing their financial statements. Recording financial transactions according to BAS ensures that the information a company shares with potential lenders and investors gives a true and fair view of its business situation. However, the tax law prescribes its own set of accounting rules, which can result in a difference between what a business shows in financial statements and what it reports on its tax returns. This paper examines whether Lithuanian companies predominantly use tax accounting principles that migrate into their financial statements to create an inaccurate picture of business performance. The method of experts’ evaluation was chosen for that purpose. The results indicate that Lithuanian companies tend to heavily rely on accounting principles prescribed in corporate income tax law thus distorting information contained in financial statements. The paper contributes to the scarce literature on this issue of high relevance to both academics and practitioners.

Journal

Scientific Annals of Economics and Businessde Gruyter

Published: Mar 1, 2016

References