Estimation of Tax Values Based on IFRS Information: An Analysis of German DAX30 and Austrian ATX Listed Companies

Rebekka Kager, Deborah Schanz and Rainer Niemann

Accounting in Europe, 2011, vol. 8, issue 1, 89-123

Abstract: Although tax values of corporate assets and liabilities could provide useful information for various economic decisions, they are typically unknown to financial statement users. Additional corporate tax information has been repeatedly claimed. We analyse whether tax balance sheets can be reconstructed using tax information provided by consolidated IFRS accounts. Our results suggest that, for DAX30 firms, the most important differences between IFRS and tax reporting occur for intangibles and provisions. For ATX companies, diverging IFRS and tax rules relating to fixed assets and provisions are the main cause for IFRS--tax differences. We find evidence that book values reported in IFRS balance sheets are generally higher than tax values. Only in connection with inventories, we observe that the median of estimated tax values is higher than IFRS-book value for both Austrian and German groups. We also try to estimate the total stock of unused tax losses because it offers information about a company's potential loss offsets and future tax payments. Our analyses show that estimated values of tax losses often do not differ substantially from the actual stock of tax losses. Due to several methodological and practical problems, we conclude that, especially for multinationals, reconstructed tax balance sheets should be critically scrutinised.

Date: 2011
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DOI: 10.1080/17449480.2011.574362

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