Analyzing the Profit-Tax Relationship

Analysts and other readers of published income statements are sometimes puzzled by the low percentage relationships they observe between Federal income taxes and pretax accounting income. This paper analyzes the underlying tax-law provisions and financial reporting practice that can create this cond...

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Bibliographic Details
Published in:Financial management 1973-01, Vol.2 (4), p.57-62
Main Authors: Comiskey, Eugene E., Hasselback, James R.
Format: Article
Language:English
Subjects:
Accounting policies
Accounting profit
Annual reports
Business structures
Capital gains
Corporate income taxes
Depletion allowances
Effective income tax rates
Effective tax rate
Financial reporting
Foreign subsidiaries
Income taxes
Installment sales
Investment credit
Investment tax credits
Investments
Profits
Provisions
Regulated industries
Research & development expenditures
Revenue Acts
State income tax
Subsidiary companies
Surtax
Tax allocation
Tax rates
Tax reform
Tax returns
Taxation
Unconsolidated subsidiaries
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Description
Summary:Analysts and other readers of published income statements are sometimes puzzled by the low percentage relationships they observe between Federal income taxes and pretax accounting income. This paper analyzes the underlying tax-law provisions and financial reporting practice that can create this condition. Also, the results of a study of the profit-tax relationship found in 100 corporate annual reports are presented. The study reports the incidence of unusually low tax percentages and the associated disclosure of the underlying reasons for such a condition.
ISSN:0046-3892
1755-053X
DOI:10.2307/3665425