Taxes

TAXES 2

Whenit comes to the issue of taxation, there may be a difference in themanner the tax is calculated depending on the principle followed. Incase the IAS is used, it may generate different tax value from thatof the GAAP. This is because the GAAP presents accounting principlesfollowed in a given country, which may be different to the IAS. Forinstance, consider the calculation of deferred tax. When calculatingthe deferred tax liability or asset, it is critical to calculatetemporary difference, which is the difference amid carrying amountand the tax base. The value of temporary difference calculated underGAAP and IAS differ because of the tax base. In GAAP, the tax base isas provided by the tax law however, it is calculated under IAS. TheIAS is the best of the two standards since it can be appliedworldwide, which provides a better comparison of taxes amid twocountries.

Animpact of FIN 48 on GAAP reporting is that the uncertainty that wasthere before, when using the GAAP reporting has been removedeffectively. One of the benefits of the requirement on financialreporting entails presenting a way of comparing two businesses thatoperate differently. Through the financial reporting, it is feasibleto compare the performance of two or more firms. Besides, throughfinancial reporting, it is possible for investors to make the rightinvestment decision. This is because financial reporting presents theperformance of different organization, which is a criticalconsideration during investment. On the other hand, I feel that FIN48 was necessary this is because it has benefits to the taxpayerbecause the uncertainty is effectively removed.