1) Do you agree with the fact that financial accounting differs from income tax accounting? What are the benefits of having different treatments for financial accounting and income tax accounting? What might the benefits be to having tax and financial accounting rules and regulations mirror one another?
2) Do you agree with the policy to use income tax rules and regulation as a mean to social and /or economic growth?
Do you agree with the fact that financial accounting differs from income tax accounting?
Yes, it is true that financial and tax accounting differ, and I think that is true because their motivations are different. Financial accounting is designed to provide a fair and reasonable presentation of consistently prepared financial data to be used by investors. Shareholders want to understand the strengths and profitability of a company in an effort to determine whether the stock should be bought, sold or held. The financial reporting rules, as designed by the FASB and enforced by the SEC provide a vast amount of historical information about a company together with lengthy narrative about both the past and possible future events. In short, financial accounting presents a snapshot of the health of a company.
Tax accounting, on the other hand, is designed to support the government in a way that is perceived to be fair to tax payers. ...
The 616 word solution provides a good comparison between financial and tax accounting including the reasons why they are different and the benefits of the differences. Examples are included to demonstrate common differences and to explain why the system works fairly well.