Do the Deferred Tax Liabilities Have Substance? Perception of Australian Practicing Auditors

Abstract

This study examines whether the provision for deferred income tax (PDIT) is perceived by the auditors as a liability of substance. To this end a survey of Australian auditors was undertaken based on the concept of liabilities as stated in the Statement of Accounting Concepts (SAC) 4. The results based on a sample of one hundred and seventy-six auditors showed that a majority of them do not consider PDIT as a liability of substance. But a majority is in favour of recognising and disclosing it in the balance sheet as a deferred credit. The ï¬ndings have implications in the context of the current review of the standard in the area of tax effect accounting in Australia and overseas.