Assessment of Deferred Tax Recognition and Measurement under IFRS and Nigeria-SAS: An Empirical Examination

Abstract

This study examines the recognition and measurement of deferred taxes of manufacturing companies in Nigeria under IAS 12 and Nigerian-SAS. Deferred tax liabilities are recognized for taxable temporary differences and deferred tax assets are recognized for deductible temporary differences. The specific objective of the study is to determine the magnitude of change in deferred tax assets, deferred tax liabilities, and current taxes following the adoption of IAS 12. Three research hypotheses were formulated for the study. This study adopted the ex-post facto research design. The sample of the study comprises of fifteen (15) manufacturing companies in Nigerian. The study relied on secondary data from annual financial statements of the companies. The formulated hypotheses were analysed using paired samples t-test for difference, while linear regression was used to check for dependence. The analysis was performed with the aid of SPSS version 23. The dependent variables were proxied using deferred tax assets, liabilities and current tax liabilities as per IFRS reporting period while the independent variable were proxied using deferred tax assets, liabilities and current tax liabilities as per Nigerian-SAS reporting period. The study finds statistical significant change in deferred tax assets, tax liabilities, and current taxes. The findings also revealed a positive connection between deferred tax of manufacturing firms in Nigeria under IFRS and Nigerian-SAS. Consequent upon this study, it was recommended among others that deferred tax assets and liabilities are to be presented at the amounts that are expected to flow to or from the reporting entity when the tax benefits are ultimately realized or the tax obligations are settled.