Mirroring Taxpayers’ Deferred Tax Accounting

Abstract

This Article highlights that federal financial reporting's failure to accrue future years’ tax revenue effects of taxpayers’ temporary book-tax differences leads to omission of trillions of dollars of net “federal deferred tax assets” and related distortion of true annual deficits. This Article demonstrates that recent technological and regulatory developments have overcome standard-setters’ practicality concerns about full accrual accounting for tax revenue and argues that FDTA fits within the standard setters’ definition of “asset.” It also offers estimates of larger FDTA items and suggestions as to how government can more precisely calculate FDTA.

Keywords: Accounting for Income Taxes, Book-Tax Differences, Public Sector Accounting, ASC 740

JEL Classification: H20, H83, M40