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CA19-7 ETHICS FOR MORE CLASSES VISIT
www.tutorialoutlet.com   CA19-7 ETHICS (Deferred
Taxes, Income Effects) Stephanie Delaney, CPA, is
the newly hired director of corporate taxation
for Acme Incorporated, which is a publicly traded
corporation. Ms. Delaneys first job with Acme
was the review of the companys accounting
practices on deferred income taxes. In doing her
review, she noted differences between tax and
book depreciation methods that permitted Acme to
realize a sizable deferred tax liability on its
balance sheet. As a result, Acme paid very little
in income taxes at that time. Delaney also
discovered that Acme has an explicit policy of
selling off plant assets before they reversed in
the deferred tax liability account. This policy,
coupled with the rapid expansion of its plant
asset base, allowed Acme to defer all income
taxes payable for several years, even though it
always has reported positive earnings and an
increasing EPS. Delaney checked with the legal
department and found the policy to be legal, but
shes uncomfortable with the ethics of it.
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