Study On Valuation Of Income Tax Accounting Information

With the development and growth of market economy in China, the gap between theAccounting Standard and Tax Law deepens. The difference need to be reflected in thefinancial report. Under this situation, Income Tax Accounting produced. Accounting forincome taxes in the International Accounting Standard and the Accounting Standard ofcountries which have developed market economy, for example, the USA and the UKaccounting standard has shaped into a set of complicated accounting treatments after manytimes of modifications and changes. However, in China, the accounting for income taxeshas been long neglected. Before the issuing of “Accounting Standard for BusinessEnterprises No.18: Taxation”(the short is CAS18) on February,15th,2006,there was noofficial accounting standard focusing on income taxes, this indicates that China’s incometax accounting treatment towards a new milestone.This paper studies the valuation of the income tax accounting information after theimplementation of the new income tax guidelines. Actually, the most different is theproduction of deferred tax after the implementation of the new income tax guidelines,therefore this paper in nature does the study of valuation of deferred tax accountinginformation.This paper pointes out that the valuation of income tax accounting informationobtained under different methods of income tax account is different. The deferred taxunder tax effect accounting method is relevant to certain degree. While deferred tax underbalance sheet liability method fits the concept of liability and asset better than that ofincome statement liability method, and the two methods come into being similar results inmost situations. Then this paper through the statistic method to validate the theoreticalanalysis and makes the conclusion is that the information under deferred tax assets haspositive relationship with the stock price, and the information under deferred tax liabilitieshas negative relationship.The dissertation consists of five parts described as below.Part I is the introduction. Includes: the research background, domestic and foreignliterature review, the theoretical and practical significance of the paper, research method,key point, difficulties and creation.Part II, firstly, discusses the development and reform process of the income taxguidelines.Secondly, contrasts China’s income tax guideline with the international’s andcomparative analyzes the old and new income tax guidelines.Part III is the theoretical analysis about the valuation of income tax accountinginformation.Firstly, this part reviews several theoretical basis. All of them make the agreementthat accounting information of income taxes is related to value of companies.Secondly, introduces the definition of the value of companies, pointed out therelationship between the value and the accounting information.Thirdly, compares the valuation of accounting information obtained under differentaccounting standards for income taxes. Make the conclusion is that the accounting information of deferred tax under balance sheet liability method is best useful for investorsto forecast the payoff of companies and estimate their value.Lastly, gives a theoretical analysis about the pertinence between the deferred taxassets and liabilities and the enterprise value combined with the definition of assets andliabilities.Part IV employs the statistic method to test the information relevance of income taxusing cross-sectional data. In order to examine the usefulness of accounting information ofdeferred tax under balance sheet liability method, the main hypothesis to set up on thebasis of Residual Income Valuation Model (RIM). The conclusion is that there is negativerelationship between the information of deferred tax under balance sheet liability and thestock price. Concretely, the information under deferred tax assets has positive relationshipwith the stock price, and the information under deferred tax liabilities has negativerelationship.Part V summarizes the research results and suggestions to the accounting standardsfor income taxes in China. This paper suggests that the relationship between theinformation of deferred tax under balance sheet liability method and the stock price is notobvious. This dissertation makes the agreement that this is the result caused by accounting...