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... In the Nordic countries, as in a number of other continental European countries, tax regulations were historically more detailed than accounting regulations. ...
In 1992 there was a reform of the tax rules in Norway, which introduced temporary differences between tax and financial accounting including:
write downs of stock to net realisable value;
provisions for bad debts;
provisions for contingencies;
certain methods of foreign currency translation;
depreciation; and
profits or losses on disposal of fixed assets (Fagerstrøm and Schwencke, 1994). ... Furthermore there remained a number of areas in financial reporting that remained sensitive to tax considerations after the 1992 reform, such as accounting for research and development costs and interest costs of self-constructed assets (Eilifsen, 1996).
The issue of whether tax and financial accounting should be separated was discussed in both Finland and Sweden in the committees drafting legislation in the 1990s to update company law and, ultimately, to implement the European Directives. ... Nevertheless, in Sweden it was becoming common for companies to use different accounting principles (independent of tax rules) in the consolidated financial statements from the entity accounts. This was acknowledged as a permissible treatment in Redovisningsrådets (The Accounting Councils) first recommendation, RR 1: 96 Koncernredovisning (Group Accounts), in 1996. ... As the tax authorities consider that tax-related reserves should not be distributed to owners, the use of different accounting principles in the group accounts can be problematic (see Artsberg, 1996), presumably because it raises unrealistic expectations in shareholders.
In Finland, there were extensive debates on the relationship between tax and financial accounting prior to the 1992 Accounting Act. ... If there were any further discussions on the relationship between tax and financial accounting, they are not evident in the proposal put to parliament. Consequently, both Finland and Sweden have retained the close association between tax and financial accounting, at least in the parent companys accounts. ... Deferred taxation has proved one of the most controversial issues in international accounting and a detailed discussion of it is beyond the scope of this article. ... Hoogendoorn (1996) classified a number of important European countries according to the strength of the tax link in the financial statements as follows:
Accounting and taxation are dependent and this is not expected to change. There is no or hardly any regulation regarding accounting for deferred taxation, and as a result several alternatives are allowed. ...
Accounting and taxation are dependent and this is not expected to change. There is some regulation regarding accounting for deferred taxation. ...
Accounting and taxation are still dependent, but there is a clear development towards an independence structure. There is no strict regulation accounting for deferred taxation. ...
Accounting and taxation are formally independent, but in practice there is still a tight link. There is no strict regulation regarding accounting for deferred taxation. ...
Accounting and taxation are independent. ...
Accounting and taxation are independent. There is a specific regulation regarding accounting for deferred taxation, of which the main characteristic is the required use of partial tax allocation. ...
Accounting and taxation are independent. There is a specific regulation regarding accounting for deferred taxation that is very similar to IASC E49, characterised by full recognition, application of the liability method, deferred taxes on revaluation, and the recognition of deferred tax assets. ... (1997) point out that Swedish companies separate accounting and tax driven ("appropriations") entries in the entity accounts.
Approximate Word count = 2699
Approximate Pages = 10.8
(250 words per page double spaced)
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