Let’s Play by the IRS Rules
Little attempt is made to reconcile the accounting standard differences between the IRS and the FASB. These differences are recognized as arising from differences in the objectives of the two bodies. However, the existence of differences requires companies to keep two different sets of records in some areas: records that follow the FASB pronouncements and those that follow the IRS rules and regulations. In many foreign countries, such as Japan and Germany, the financial accounting standards closely follow the tax rules established by the respective government. What applies for taxes often applies for the balance sheet and the income statement as well. Should the United States follow the practice of many foreign competitors? What are the advantages of merging accounting standards for taxes and financial reporting? What are the disadvantages? What would it take to change a system so deeply ingrained in the business fabric of either the United States or other countries?