Ethics: Deferred Taxes, Income Effects
Stephanie Delaney, CPA, is the newly hired director of corporate taxation for Acme Incorporated, which is a publicly traded corporation. Ms. Delaneyâ€s first job with Acme was the review of the companyâ€s accounting practices on deferred income taxes. In doing her review, she noted differences between tax and book depreciation methods that permitted Acme to realize a sizable deferred tax liability on its balance sheet. As a result, Acme paid very little in income taxes at that time. Delaney also discovered that Acme has an explicit policy of selling off plant assets before they reversed in the deferred tax liability account. This policy, coupled with the rapid expansion of its plant asset base, allowed Acme to â€œdeferâ€ all income taxes payable for several years, even though it always has reported positive earnings and an increasing EPS. Delaney checked with the legal department and found the policy to be legal, but she is uncomfortable with the ethics of it.
Answer the following questions in the Discussion Board:
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Accounting for income taxes. Intermediate accounting (16th ed.). (p. 1107). New York, NY: John Wiley & Sons, Inc.
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