Unrecognized Deferred Taxes: Evidence from the U.K.

Abstract

We examine whether U.K. managers use the flexibility provided under the partial method for deferred taxes to measure unrecognized deferred taxes opportunistically. We first test whether firm-specific operational and opportunistic factors are associated with the level of unrecognized deferred taxes. The tests provide evidence certain U.K. managers opportunistically measure deferred taxes to manage leverage, consistent with arguments by commentators that deferred taxes heavily influence leverage indicators that play a prominent role in the U.K. contracting framework. Because the proper identification and measurement of both operational and opportunistic determinants of unrecognized deferred taxes influence our tests, we additionally investigate whether unrecognized taxes relate to future deferred tax reversals and future operating profitability of the firm. These tests show the components of deferred taxes predict both future deferred tax reversals and indicators of future profitability of the firm as predicted. Taken together, our results indicate that, on average, the existence of balance sheet management does not nullify the predictive power of (unrecognized) deferred taxes for future deferred tax reversals and for profitability measures. One implication of the results is that the recent U.K. standard change eliminating the partial provision method for deferred taxes potentially has reduced the usefulness of deferred tax disclosures.

Influência do fluxo de caixa operacional no gerenciamento de resultados em empresas da construção civil listadas na BM&FBovespa

“…Martinez (2001) (Cardoso e Martinez, 2006;Gramlich et al, 2001;Gordon e Joos, 2004;Gunny, 2005;Roychowdhury, 2006).…”

Comparison of Deferred Tax Materiality Reporting in Accordance with Continental and Anglo-Saxon Reporting System

“…There are only studies of Gordon, Joos (2004), Bohušová, Svoboda (2005), Chludek (2011), andVučković-Milutinović, Lukić (2013).…”

Características Dos Tributos Diferidos Nas Companhias Abertas Brasileiras Após a Adoção Das Ifrs

“…A pesquisa justifica-se no sentido de dar continuidade aos trabalhos realizados sobre o tema no Brasil e no mundo (GRUPTA, 1995;MILLER;SKINNER, 1998;COVARSÍ;RAMÍREZ, 2003 JOOS, 2004;ALVES, 2008;ROJAS et al, 2010;KRONBAUER et al, 2010;KRONBAUER et al, 2012;ANCELES, 2012) e inova ao investigar os primeiros anos de adoção por parte das companhias brasileiras das normas internacionais no Brasil e durante o período de vigência obrigatória do RTT, quando ocorreu um maior distanciamento do resultado contábil do fiscal.…”