Thursday, February 16, 2012
Financial reporting issues of tax uncertainty
On February 8, 2012, the House Ways and Means Committee held a hearing on the Interaction of Tax and Financial Accounting on Tax Reform. In announcing the hearing, Chairman Camp noted:
"the large and growing number of enacted and proposed temporary business tax incentives and other provisions creates planning and economic uncertainty for public and private companies alike, and diminishes the intended policy objectives of these provisions. As a result, companies across the business community have identified the need to bring stability to our tax laws as a key tax reform objective."
It is good to hear that acknowledged. Temporary provisions, particularly when they area allowed to expire before renewed, cause not only issues of tax calculations, estimated tax payments and tax planning, but also affect financial statements. Businesses cannot assume the provisions will be renewed, they must base the income tax expense on the financial statements with the law as it exists at the time.
Hopefully the hearing also addressed where the tax law might better align with financial reporting, where appropriate.
The testimony can be found here.