Study On The Value Relevance Of Deferred Taxes

The promulgating of"Accounting Standards for Enterprises No.18-Income Tax"is a crucial measure to regulate and improve the treatment of income tax accounting, indicates that China's income tax accounting treatment towards a new milestone, achieved convergence with the international. This paper analyzes how the implement of the New Income Tax Accounting Standards influences the relevance value of deferred taxes accounting information.First, the paper summarizes the current research status about income tax guidelines, discusses the development and reform process of the income tax guidelines, contrasts China's income tax guideline with the United States'and the international's and comparative analyzes the old and new income tax guidelines. Then, this paper reviews the theoretical basis of the value relevance study, teases the concept and connotation of the value relevance, and gives a theoretical analysis about the pertinence between the deferred tax assets and liabilities and the enterprise value combined with the definition of assets and liabilities. On this basis, the paper uses the pricing model and return model to comparative analyzes the value relevance of the deferred taxes between before the implementation of the new income tax accounting standards and after the implementation, testes the change of deferred taxes'value relevance after the implementation of the new income tax standards, and specially research the nature and value relevance of the deferred tax assets and liabilities after the implementation of the new income tax guidelines.The paper's research show that the over value of income tax accounting information is significantly enhanced after the implementation of the new income tax guidelines, compared with the old income tax guidelines. Under the old income tax criteria, the net deferred tax and the deferred tax liabilities (credit balance) don't have significant effect on the company's stock, only the deferred tax assets is positive correlative with the company's stock at the 5% significance level. Under the new income tax guidelines, the regression coefficient of the net deferred taxes and the deferred tax assets are positive, the regression coefficient of the deferred tax liabilities is negative, and they all adopt the statistical test at the 1% significance level. These show that the reform of income tax accounting standards improves the decision usefulness of income tax accounting information. Under the new guidelines, the capital market investors treat the deferred tax assets as real assets and the deferred tax liabilities as real liabilities. This is consistent with the new income tax standards. In addition, this paper also examines the differences of value relevance in different years and industries under the new income tax standards, and discusses the reasons of the difference.