Reading 17 & 18

Assume the Financial reporting does not affect reporting for income taxes.

I’ve seen the statement above in a couple of the examples in the FRA readings, what does this exactly mean?

This kind of statement is most likely to be made when you are asked to compare the effects of two accounting policies such as to capitalise or to expense immediately (in P&L).

The statement implies that the company’s tax return will not change with the choice of accounting policy made for financial reporting purposes, hence there will be no impact on income tax payable.

Effectively, when considering the different accounting policy choices, you can ignore any possible tax effects.

all the best!