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Market's perception of deferred tax accruals

Market's perception of deferred tax accruals This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ‘income statement method’ (AASB 1020 Accounting for Income Taxes) over the period 2001–2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss‐makers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting & Finance Wiley

Market's perception of deferred tax accruals

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References (27)

Publisher
Wiley
Copyright
© The Authors. Journal compilation © 2009 AFAANZ
ISSN
0810-5391
eISSN
1467-629X
DOI
10.1111/j.1467-629X.2009.00307.x
Publisher site
See Article on Publisher Site

Abstract

This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ‘income statement method’ (AASB 1020 Accounting for Income Taxes) over the period 2001–2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss‐makers.

Journal

Accounting & FinanceWiley

Published: Dec 1, 2009

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