There was opposition to the discounting proposal during the consultation period, but the ASB’s decision to make it optional under FRS 19 is unlikely to satisfy the critics.

The standard-setter expects that it will largely be capital-intensive companies that adopt discounting in order to minimize the impact of a large deferred tax balance on their distributable reserves. However, there is nothing to stop companies that do not fall into this industry grouping from discounting their deferred tax balance, thereby reducing the comparability of financial statements within that sector.

The ASB’s defense -- that FRS 19 is more closely aligned with the international standard (IAS 12, Income Taxes) than its predecessor (SSAP 15, Accounting for Deferred Tax) -- will not wash with the critics, who will argue that the differences from IAS 12 are substantial. As well as offering discounting as optional, it does not require deferred tax to be provided for when assets are revalued or adjusted to their fair values on the acquisition of a business. Cynics will see this standard as the ASB’s attempt to influence changes to the international standard.

The ASB also released FRS 18, Accounting Policies. This standard deals with the selection, application and disclosure of accounting policies. It is essentially a reiteration of SSAP 2, Disclosure of Accounting Policies, with a small change of emphasis.

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