Influence Of Effects Of Temporary Differences In Fair And Objective Financial Reporting In The Republic Of Croatia According New Tax Regulations

The main purpose of the financial statements as the final product of financial accounting is to provide fair and fair view of the financial position and financial performance of a business entity. This assumes the application of accounting principles in. the full i.e. comprehension the financial effects of a business transactions in whole and in accordance with the nature of a business event, and not in part. The consequence of the comprehension of business events results in part is nonobjective and not fair financial reporting, either through overestimation or through underestimation elements or some positions of the elements of the financial statements. It also means that the nonrecognition of tax effects of temporary differences means incomplete application of the accounting principles of IAS 12 - Income Taxes, or CFRS 14 - Accruals, which may mean that the financial statements are neither fair nor objective. The real economic consequence of temporary differences whose tax effects are not comprised according to the IAS 12 or CFRS 14 principles is underestimation or overestimation of profit after taxation. Overestimated or underestimated profit in the year in which the temporary difference arise means under- or overestimated capital, i.e. under- or overestimated net assets (with all the eventual financial effects on the volume and structure of profit distribution). In fact, the eventual consequence is that financial statements are neither fair nor objective.