The taxation of business income: aligning taxable income with accounting income

In this report, the Committee has been considering the relationship between tax and accounting measures of business income. Increasingly, the courts have been prepared to accept the use of accounting standards without an overlay of specific tax rules. Year by year more legislation draws upon accounting principles and practices to define the business tax base. Where could might or should this growing relationship between tax and accounting lead? The recent developments raise fundamental questions about the appropriateness of linking the business tax system to an evolving accounting process. For example, are current accounting principles and practices consistent with the requirements of the tax system? Does the current direction of accounting evolution support the closer alignment of tax and accounting measures of business income? Will closer alignment inhibit agreement on accounting standards that would otherwise improve financial reporting?