Accounting For Income Taxes: A Study Of Early Vs. Postponed Adoption Decisions For Controversial Accounting Standards

Abstract

The provisions of the FASB standard on accounting for income taxes, SFAS No. 96, were complex and controversial. Moreover, the FASB provided corporations with considerable flexibility in deciding when to adopt SFAS No. 96. Under these circumstances, managements had an opportunity to time their adoption decisions to best serve the interests of the corporation and stockholders. This study compares the attitudes and perceptions of controllers for corporations that adopted SFAS No. 96 early with controllers of corporations that postponed adoptions. While the controllers opinions on the usefulness of SFAS No. 96 reporting are mixed, the results indicate that the effects on the financial statements and the ease of gathering needed data seem to influence a firms timing decision when there is a choice between early and delayed adoption of controversial accounting standards.