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ИД «Финансы и кредит»






International Accounting

Deferred taxes in financial institutions: A review of empirical research and the role of tax effects in regulatory capital. Part 2

Vol. 26, Iss. 11, NOVEMBER 2023

Received: 20 February 2023

Received in revised form: 31 August 2023

Accepted: 7 September 2023

Available online: 16 November 2023


JEL Classification: G21, G29, H32, H39, M41

Pages: 1248–1266


Subject. This article examines the industry practices of the regulation of deferred taxes in financial institutions.
Objectives. The article aims to analyze the significance of deferred taxes for financial institutions (banks, insurance organizations) and determine the role of tax effects in regulatory capital.
Methods. The research is speculative. For the study, I used the dialectical method of scientific knowledge, the method of collecting theoretical and regulatory information, the method of formalization, as well as analysis, synthesis, observation, and comparison.
Results. The article finds that the preventive nature of the accounting revaluation of deferred tax assets controls the probability of their recovery at the expense of future taxable profits, and therefore they should be included in the regulatory capital. It determines that a full reversal of the active deferred tax position is possible if the accounting assets generate income with the profitability necessary to cover the deductible temporary differences in excess of the balance sheet valuation of the assets.
Conclusions and Relevance. At present, the theoretical basis of deferred taxation continues to remain undisclosed. Deferred taxes are an artificial information construct that refines the measurement of assets at fair value. Deferred taxes alone are not able to generate cash flow, they reconcile the tax flow with the financial flow in relation to the fair value of assets in order to show how much value the assets will generate taking into account the current tax situation. The results of the study can be useful to practitioners in the field of deferred tax accounting and banking management, as well as analysts and researchers whose activities are focused on accounting, taxation, and other persons concerned who study the theoretical and financial aspects of deferred taxes.

Keywords: deferred taxes, regulatory capital, banks, deferred tax assets, financial institutions


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Vol. 26, Iss. 11
November 2023