Influence of rules for computing corporate income tax on the ccuracy of financial statements of Lithuanian companies

Research output: Contribution to journalArticle

Abstract

Companies in Lithuania have to follow Business Accounting Standards (BAS) when preparing their financial statements. Recording financial transactions according to BAS ensures that the information a company shares with potential lenders and investors gives a true and fair view of its business situation. However, the tax law prescribes its own set of accounting rules, which can result in a difference between what a business shows in financial statements and what it reports on its tax returns. This paper examines whether Lithuanian companies predominantly use tax accounting principles that migrate into their financial statements to create an inaccurate picture of business performance. The method of experts’ evaluation was chosen for that purpose. The results indicate that Lithuanian companies tend to heavily rely on accounting principles prescribed in corporate income tax law thus distorting information contained in financial statements. The paper contributes to the scarce literature on this issue of high relevance to both academics and practitioners.
Original languageEnglish
Pages (from-to)65-81
JournalScientific annals of economics and business
Volume63
Issue number1
DOIs
Publication statusPublished - 2016

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Financial statements
Corporate income tax
Tax
Accounting principles
Accounting standards
Investors
Lithuania
Business performance
True and fair view
Evaluation

Keywords

  • Accounting principles
  • Financial statements
  • Corporate income tax
  • Lithuanian companies

Cite this

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title = "Influence of rules for computing corporate income tax on the ccuracy of financial statements of Lithuanian companies",
abstract = "Companies in Lithuania have to follow Business Accounting Standards (BAS) when preparing their financial statements. Recording financial transactions according to BAS ensures that the information a company shares with potential lenders and investors gives a true and fair view of its business situation. However, the tax law prescribes its own set of accounting rules, which can result in a difference between what a business shows in financial statements and what it reports on its tax returns. This paper examines whether Lithuanian companies predominantly use tax accounting principles that migrate into their financial statements to create an inaccurate picture of business performance. The method of experts’ evaluation was chosen for that purpose. The results indicate that Lithuanian companies tend to heavily rely on accounting principles prescribed in corporate income tax law thus distorting information contained in financial statements. The paper contributes to the scarce literature on this issue of high relevance to both academics and practitioners.",
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author = "Gintaras Černius and Liucija Birskyte and Arturas Balkevicius",
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AB - Companies in Lithuania have to follow Business Accounting Standards (BAS) when preparing their financial statements. Recording financial transactions according to BAS ensures that the information a company shares with potential lenders and investors gives a true and fair view of its business situation. However, the tax law prescribes its own set of accounting rules, which can result in a difference between what a business shows in financial statements and what it reports on its tax returns. This paper examines whether Lithuanian companies predominantly use tax accounting principles that migrate into their financial statements to create an inaccurate picture of business performance. The method of experts’ evaluation was chosen for that purpose. The results indicate that Lithuanian companies tend to heavily rely on accounting principles prescribed in corporate income tax law thus distorting information contained in financial statements. The paper contributes to the scarce literature on this issue of high relevance to both academics and practitioners.

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