Comprehensive Versus Partial Deferred Tax Liabilities and Equity Market Values

20 Pages Posted: 3 Nov 2011

See all articles by Jilnaught Wong

Jilnaught Wong

University of Auckland

Norman Wong

University of Auckland Business School

Vic Naiker

University of Melbourne - Faculty of Business and Economics

Date Written: December 2011

Abstract

This study investigates the value relevance of the deferred tax liability recognized using comprehensive versus partial allocation. Our research examines New Zealand firms who, prior to the introduction of International Financial Reporting Standards, were free to choose between comprehensive and partial allocation. We test the joint hypothesis that the partial, as opposed to comprehensive, deferred tax liability is relevant for equity valuation and is sufficiently reliable to be reflected in investors’ valuation assessments. Our results are consistent with this prediction.

Keywords: Deferred tax liability, Comprehensive and partial allocation, Value relevance

JEL Classification: G14, M41

Suggested Citation

Wong, Jilnaught and Wong, Norman and Naiker, Vic, Comprehensive Versus Partial Deferred Tax Liabilities and Equity Market Values (December 2011). Accounting & Finance, Vol. 51, Issue 4, pp. 1087-1106, 2011. Available at SSRN: https://ssrn.com/abstract=1953773 or http://dx.doi.org/10.1111/j.1467-629X.2011.00430.x

Jilnaught Wong (Contact Author)

University of Auckland ( email )

Private Bag 92019
Room: 210/328
Auckland
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(64) 9 373-7406 (Fax)

Norman Wong

University of Auckland Business School ( email )

Private Bag 92019
Auckland, 1001
New Zealand
(64 9) 3737599 Ext. 87098 (Phone)
(64 9) 373 7406 (Fax)

HOME PAGE: http://www.business.auckland.ac.nz

Vic Naiker

University of Melbourne - Faculty of Business and Economics ( email )

198 Berkeley Street
Melbourne, Victoria, 3010
Australia

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