An Empirical Examination of Annual Report Presentation of the Corporate Income Tax Expense.

Abstract This article examines the financial reporting of the corporate income tax expense in annual reports to shareholders. Specifically, the research examines the extent to which the financial reporting of corporate income taxes is in accordance with pronouncements of the Accounting Principles Board (APB) and whether the extent of adherence to these pronouncements is related to corporate federal income tax rate incurred, corporate size and independent auditor. The implications of this study are many. First, a significant number of corporations did not adhere to selected APB Opinion income tax disclosure requirements. Since the sample was random, nonadherence can be projected to the population comprising the New York and American Stock Exchanges. The nonadherence to the presently required APB Opinion income tax disclosure requirements makes prediction of future net income more difficult. Without the "required" information, let alone additional needed information, the determination of the expected future income tax rate of a corporation becomes a near impossibility.