Doesn'T Matter

S K Barua, in his article The Left and Right of MAT (January 30) proposed deferred tax accounting (DTA) as a way to remove the current lack of alignment between reported and taxable profits. The market is already aware of the realities of taxation and does not require companies to formally follow DTA to aid in valuations.

After all, DTA does not change any real economic realities as it is just a method of accounting. Also, the example, in the article, lacks conviction as it violates the basic principle of a going concern. American firms following DTA, have a large liability of deferred tax on their books which will not vanish even if they continue to even just replace their assets and not grow.

 

So does DTA really Matter?