Skip to main content Accessibility help
×
Hostname: page-component-78c5997874-j824f Total loading time: 0 Render date: 2024-11-05T21:09:29.878Z Has data issue: false hasContentIssue false

12 - Interaction of accounting with tax

from Part II - Some specifics

Published online by Cambridge University Press:  02 November 2009

Get access

Summary

Introduction

Company financial statements and corporate tax are closely related in a number of ways. First, although assessment of corporation tax is based on complex rules of tax law and practice, the starting point is the pre-tax profit shown in the company's annual statutory financial statements. Tax is levied at the entity, not consolidated, level so it is the individual company financial statements that are of relevance when preparing the tax computation. Second, financial statements need to reflect a company's obligations to pay tax. The most obvious example of this is the tax payable in respect of each year. However, in addition, accountants have developed accounting for ‘deferred tax’, the effect of which is that, generally, the tax effects of transactions are recognised in arriving at profit/loss in the same period that the transaction itself is recognised in arriving at profit/loss. Similarly so for other comprehensive income. Additionally, there is the question of how the move to IFRS at individual entity level affects tax assessment; although the group accounts of listed companies have now moved to IFRS, many individual entity accounts within those groups are still prepared using UK GAAP. These issues are discussed in turn. This chapter seeks to give an introductory guide to accounting aspects of the issues; it is not a guide to tax law or practice.

Accounting profit and its adjustment

Accounting profit – specifically, the profit before tax figure in the income statement/statement of comprehensive income – is the starting point for assessment of corporation tax. However, a number of adjustments are made.

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×