Экономические науки/7.Учет и аудит

Aletkin Pavel, Ph.D.

Kazan Federal University, Russia

The Development of Deferred Tax Accounting Regulation in Russia in comparison with Germany and Czech Republic

In market economy investors are interested in getting high-quality information about financial position and financial results of companies. The intensifying processes of developing accounting rules lead to appearance of deferred tax assets and liabilities in countries with transitional economies such as Russia in order to motivate companies to provide high-quality in information in financial reporting. The disclosure of information about deferred tax assets and liabilities in financial statements allows investors to understand not only the current but also future tax consequences of business transactions.

Russian accounting system is strictly regulated by the government and the Ministry of Finance is the legal body that has to develop and issue accounting standards for professionals. In 2002 Russia suffered a number of reforms in taxation and accounting field that resulted in total separation of financial accounting and tax accounting. Because of the different rules in recognition of income and expenditures in financial accounting and tax accounting there was an objective need to issue an accounting standard dealing with disclosure of deferred tax assets and liabilities in financial statements of Russian companies.

Formal rules for the recognition of deferred taxes were introduced into Russian accounting law in 2002 as a consequence of harmonization national accounting rules with International Financial Reporting Standards. Russian Ministry of Finance issued an Accounting Standard PBU 18/02 “Accounting for Income Tax”. The rules for the recognition of deferred taxes were quite similar to the rules prescribed by International Accounting Standard IAS 12 “Income Taxes”.

However it’s important to note that Russian Accounting Standard was based on old version of International Accounting Standard IAS 12 “Income Taxes” issued in 1979 and it required deferred taxes to be recognized in respect of timing differences. This method of recognition of deferred tax assets and liabilities is known as income statement liability approach but currently International Accounting Standard IAS 12 “Income Taxes” prescribes to use balance sheet approach. This means that deferred tax assets and liabilities should be recognized in respect of temporary differences.

For comparison we should point out that in Germany and Czech Republic income statement liability approach was introduced much earlier than in Russia: in 1985 and 1994 respectively.

Difference between two Accounting Standard PBU 18/02 “Accounting for Income Tax” and International Accounting Standard IAS 12 “Income Taxes” creates problems for big Russian companies. According to Federal Law adopted in 2010 Russian companies issuing securities on a regulated market securities were obliged to comply with international financial reporting standards starting from 2012. These companies have to use income statement liability approach when compiling financial statements according to Russian accounting standards and use balance sheet approach in financial statements based on international standards.

From our point of view the development of accounting for deferred taxes was much better planned in Czech Republic than in Russia. From 1994 till 2000 only entities in a group accounted for deferred taxes in Czech Republic[2]. On the contrary all the companies in Russia besides small business had to calculate deferred taxes though the information about deferred taxes was irrelevant for statements users because most of them didn’t report in compliance with International Financial Reporting Standards.

The other positive sign of deferred tax standards development was introducing balance sheet approach in 2002 in Czech Republic[2]. Germany switched from income statements liability approach to balance sheet approach later in 2010[1].

Understanding that balance sheet approach is more progressive method than income statement liability approach Russian Ministry of Finance decided to change the rules Accounting Standard PBU 18/02 “Accounting for Income Tax”. Since 2002 there were made several amendments to this standard.

In 2008 there were allowed to determine the amount of income tax based on the amount declared in company’s tax statements. Simultaneously the recognition of deferred taxes and liabilities was allowed to make by corresponding with the profits (loss) account. This amendment has brought Russian accounting standard more in line with IAS 12 “Income Taxes”.

Thus currently Russian Accounting Standard PBU 18/02 “Accounting for Income Tax” contains a mix of income statement liability approach and balance sheet approach. Comparing with the IAS 12 “Income Taxes” temporary differences arising from business combinations, investing in associate companies and some others are not recognized by Russian companies.

The other big obstacle is a big number of permanent differences that Russian companies have to account for. This information is rarely relevant for financial statements users and takes precious time of accounting professionals.

From our perspective Russian Accounting Standard PBU 18/02 “Accounting for Income Tax” needs to be further changed by introduction of balance sheet liability approach.

References

1. Glaum M., Meyer H. Value Relevance of Deferred Taxes under IAS12: Evidence from German Companies // Justis-Liebig-Universitaet Giessen. – 2011.

2. Zarova, M. Impact of IAS 12 on Deferred Tax Regulation in the Czech Republic // European Financial and Accounting Journal, 2010, vol.5, no. 1, pp. 6-27.