Tham khảo tài liệu 'wiley accounting and finance_9', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | Evaluating the Operations of the Business SECTION III entirely. In effect the deferred taxes may be less when paid after the law changes instead of before. The rate or the method of calculation of liability could change. Of course the reverse may also be true. A tax deferral is in effect an interest-free loan from the federal government. It can be recognized as a valid financing source because there can be no more favorable rate than a zero interest rate for a loan. Many tax options are under the company s control. When one option fails to be favorable it can change to another. Tax planning can have significant advantages. It can help conserve cash flow by deferring the payment of taxes. It can make available interest-free capital for the financing and purchase of new fixed assets or expansion. It can free up additional cash and make more disposable cash available for payout. Controlling Tax Liabilities When planning for treatment of tax expenses consider these accounting methods and choices of accounting periods for controlling the amount of tax liabilities that may be incurred. Deferred Installment Sales A company may be able to defer income if it makes sales of personal property on an installment sales basis. An installment sale is defined for tax purposes as requiring two or more payments. Therefore a company that sells personal property on a credit basis requiring only one payment in a certain period would not qualify for use of this deferral method. This deferral is permitted even if the overall method of accounting used is an accrual method. The company realizes a cash flow improvement by not having to prepay the tax on profits until they have been realized in cash payments. If you sell on installment sales contracts do not fail to utilize this deferral method. 232 Taxes and Risk Management CHAPTER 8 Another consideration is the company s credit policy. In establishing a credit policy the firm should consider the tax advantages of certain installment sales.
