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This article addresses the theoretical challenges posed by the implementation of Statement 96 regarding income tax allocation.

June 15, 2026

Statement of Financial Accounting Standards No. 96: Some Theoretical Problems.

Key Points

This article addresses the theoretical challenges posed by the implementation of Statement 96 regarding income tax allocation.
Analyzes changes brought by Financial Accounting Standards No. 96 compared to APB Opinion No. 11.
Explores the implications of the liability method versus the deferred method in financial reporting.
Discusses the formula approach for calculating future tax consequences of temporary differences.
Statement 96 shifts focus from matching income tax expense to measuring assets and liabilities on the balance sheet.
Introduces strict formulaic assumptions impacting tax expense recognition.
Highlights the implications for financial statements under the new accounting framework.

Abstract

Abstract This article focuses on the theoretical problems imposed by the change in income tax allocation with the issuance of Statement of Financial Accounting Standards No. 96 also called Accounting for Income Taxes, which came out December 1987, superseding APB Opinion No. 11 in the U. S. Statement 96 keeps the comprehensive income tax allocation orientation of APB Opinion No. 11 but it substitutes a liability method in place of the deferred method of its predecessor. It employs a strict formula approach with some unusual assumptions for calculating the accrual of future tax return consequences of temporary differences. Statement 96 has changed the focus of income tax expense recognition from matching and emphasis on the income statement to appropriate definition and measurement of assets and liabilities and emphasis on the balance sheet.

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