Abstract:
This article examines the effect of the Budget 2007 announcement that the corporate tax rate will decrease from 33 percent to 30 percent from the beginning of companies’ 2008-09 income year. The decrease will impact on companies’ deferred tax assets and liabilities, which were recognised at 33 percent, but are likely to be recovered and settled at the 30 percent tax rate. This article explains how the reduction in the tax rate is to be accounted for under International Financial Reporting Standards as outlined in the New Zealand Equivalent to International Accounting Standard 12: Income Taxes (NZ IAS 12) because there is a dearth of detailed recommendation on how to apply the standard. The article illustrates the application of NZ IAS 12 with two examples of New Zealand listed companies’ accounting for the change in the tax rate.