The Information Content of Deferred Taxes Under IFRS
European Accounting Review, Forthcoming
54 Pages Posted: 4 Nov 2020
Date Written: 2020
As prior evidence on deferred taxes under IFRS is scarce and inconclusive, this study examines whether deferred taxes reported in a German conservative accounting environment have information content. To improve informativeness, I propose a new split into four deferred tax categories. Applying this split, I replicate prior literature’s value relevance tests. Next, I examine whether the (lack of) value relevance can be explained by predictive ability. My findings indicate that aggregate deferred taxes are value relevant and that the new split informs about the drivers of this value relevance. It further helps to disentangle value relevance and predictive ability which do not always go hand in hand. Taken together, my results suggest that applying the new categorization improves the information content of deferred taxes.
Keywords: deferred taxes, IAS 12, predictive ability, value relevance
JEL Classification: M41, M48
Suggested Citation: Suggested Citation