Congress tackles impact of accounting on US tax reform
10 February 2012
Matthew Gilleard - ITR
In its latest meeting about comprehensive tax reform, the House Ways and Means Committee on Wednesday held its first hearing on the effect of tax and financial accounting on tax reform, and on how businesses evaluate tax policy, concluding that financial accounting factors must be a consideration when designing reform.
Committee chairman Dave Camp said in his opening statement that the hearing sought to “consider how public companies evaluate tax policy options in light of financial accounting – or book considerations”. He commented on the inconsistent, or even opposing, functions of companies reporting profits in their financial statements – to convey information about a company’s financial condition to investors and creditors – versus the main purpose of tax accounting – to measure income for levying federal income tax.
“These two functions are not necessarily consistent, and in some cases, may even be at odds,” Camp said.
As with all US committee hearings dealing with the issue of tax reform, Camp referred to the high US corporate tax rate, describing it as “an important factor for companies that use either GAAP [Generally Accepted Accounting...
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