The Relevance of Tax Information in Other Comprehensive Income
Tax Administration Research Centre (TARC)
|Speaker:||Soojin Lee, Vienna University|
|Date:||Tuesday 28 January 2014|
|Location:||Kolade Teaching Room, Building One|
Given the general notion that more transparency, i.e. additional disclosure in financial accounting is beneficial per se on the one hand, and on the other hand given increasing scepticism about an information overload in the statements, this study investigates the relevance of specific tax accounting information. For Other Comprehensive Income (OCI) disclosure about deferred taxes on OCI-items (certain fair value measurements, pension accounting, and currency conversion) is required. We focus on whether the tax information given is relevant to the financial statement reader by using an experimental design, which allows us to manipulate the existence of tax information only, ceteris paribus. Participants, expert users and students, judge on the financial performance, the investment condition and the tax position of the firm. The results do not support the idea that such deferred tax information in OCI is relevant. The (non-)existence of tax information made no difference in judgment. This result is in contrast to perceptions of standard setters and should be kept in mind when considering further development of IAS 1 and IAS 12. Previous research on tax disclosure and on OCI disclosure does not cover deferred tax in OCI. Our results are novel and the method used allows to isolate the effects that we search for.
Key words: deferred taxes, other comprehensive income, income tax disclosure, experimental study, information processing