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Myers and Collins
of the future income taxes would be a result of earning the taxabl e revenue in the future,
in conjunction with the past events. The th ird criterion, that the obligation for future
income taxe s must not be a r esult of f uture events, alone or in conjunction with past
events, wouldn’t be met (Rosenfield and Dent, 1983, p. 50).
On this basis, Rosenfield and Dent (Rosenfi eld and Dent, 19 83) supp orted elim inating APB
Opinion No. 11 from GAAP.
In summary, the responses to t he discussion memorandum showed that t he ghosts of discontent
surrounding the income tax issue had not been laid to rest. This was the FASB’s chance to clarify
this hotly debated issue, but, alas, they did not. In 1984, the FASB “decided tha t things are best
left alone” (Gleick, 1984). What appears to have happened is that the FASB received many
negative comments from corporate officials.
Many corpor ate officials were reluctan t to give their inco me figures this boost. They
prefer to use conservative esti mates in case they cannot continue to purchase new as sets,
or depreciation laws change. After listen ing to such negative co mments, the board
moved recently to retain the old method of accounting for deferred tax liabilities (Gleick,
1984, p. 119).
The FASB obviously was swayed more by public pressure than by normative accounting theory.
Businesses are obviously more concerned with how difficult a standard is to i mplement and how
it will make them look in co mparison to other companies, rather than wh ether or not the
presentation in the statem ent is a fair reflection of their position. They were com fortable with
deferred taxes.
“We’ve lived with deferred taxes for 16 y ears, we understand them now and we don’t
want drastic revisions”, say s Eugene Flegm , dep uty assistant com ptroller at General
Motors. “Businesses don’t like to keep changing the size of the playing field” (Andresky,
1984, p. 206).
CONCLUSION
Regardless of how corporate officials felt about the deferred tax issue and how change would
impact their organization, it was apparent that the deferred tax account was growing to a material
amount on many balance sheets. If the account was not reversing out as originally thought,
because of both larger and larger purchases of group assets and changes in tax rates by the time
any of the account did reverse, then something needed to change. The FASB, realizing the
complexities still requiring resolution, replaced APB Opinion No. 11 with SFAS 96 in 1987.
Delayed three times from implementation, SFAS 96 was replaced in 1992 by SFAS 109. But the
standard setting environment and political pressures surrounding these pronouncements is but
another story yet to be told.
REFERENCES
Accounting Standards Original Pronouncements July 1973-June 1, 1986 (1986). Financial
Accounting Standards Board, Stamford, Connecticut.
Andresky, Jill (1984). "Leaving Well Enough Alone." Forbes, May 7, 2006.
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