ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Effect of the Fair Value Model under IFRS on Tax Reconciliation

  • Hyun-Geol Shin Konkuk University
  • Jae Yeon Jeong Kangwon National University

Asian Tax Journal Vol. 10 No. 4 (2009), pp. 43-73

Abstract

This paper examines an effect of IFRS(International Financial Reporting Standards) on the reconciliation of corporate tax in Korea. It is expected that IFRS will significantly influence the tax reconciliation since the assets including tangible and intangible assets can be measured at fair value under IFRS, however the corporate tax law does not basically admit the measurement of fair value. We provide the expected effect of IFRS on the reconciliation of corporate tax as follows. The reconciliation process will become more complicated when the companies adopt the revaluation model for property, plant and equipment, intangible assets, investment property and non－current assets held for sale. And new tax regulation is needed for the treatment of agricultural produce and a biological assets since Korean tax law does not have any related rules. It is desirable for the tax law to admit the IFRS's fair value model especially for the financial instruments to reduce the practical burden for reconciliation. And it is inevitable to reform the tax law to deal with the employee pension plan because the basic concept and approach of IFRS and those of tax law are basically different from each other. The area of fair value measurement under IFRS is so enormous that we cannot include all of the reconciliation and review the specific cases in detail. However, we expect that our suggestion in this paper will be useful for the tax authority to reform the corporate tax law in the future.

Keywords

  • IFRS
  • fair value model
  • tax reconciliation

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