Deferred Tax Case Summary

1) What is the economic intuition and what are the concepts underlying deferred tax accounting? What goals/objectives are standard setters trying to achieve by requiring deferred tax accounting, compared to say, just having companies recognize tax expense as the cash paid (or at least currently owed) to the government?

The economic intuition of deferred tax accounting is to account for the differences between the tax expense shown in the financial statements and the current taxes payable to the government. Under the accrual method, management has a large amount of judgment as to when to recognize revenues and expenses. However, for tax purposes, cash is taxed when it is received. The difference in the time between when these revenues and
|3 |Business restructuring reserves | $ 632 | $ - |N/A |
|4 |Other operating reserves | $ 536 | $ 407 |32% |
|5 |Postretirement and other benefits | $ 2,386 | $ 2,352 |1% |
|6 |Net operating loss/credit carry forwards | $ 2,538 | $ 240 |958% |
|7 |Other | $ 636 | $ 364 |75% |
|8 |Valuation allowance | $ (742) | $ (197) |277% |
| |Total deferred tax assets | $ 7,675 | $ 3,562 |115% |

| |Deferred income tax liabilities |2001 |2000 |% change |
|1 |Pension | $ 1,971 | $ 2,480 |-21% |
|2 |Property, Plant and equipment | $ 5 | $ 417 |-99%