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An Assessment of the Equity Method in Subsidiaries and Its Ability for Use in Tax Applications

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  • Arif Ayluctarhan

    (Istanbul University, Faculty of Business, Department of Commercial Law, Istanbul, Turkey)

Abstract

In accordance with the full set of International Financial Reporting Standards/ Turkish Financial Reporting Standards (IFRS/TFRS), investments in subsidiaries and business partnerships are recorded using the equity method when significant influence has been achieved with regard to the power to participate in finance- and investment-related policies. This principle determines the value of participation and involvement and also affects the accrued dividend income. The dividend income is based on tax legislation in addition to the value of the partnership share as assessed through the purchase price and book value and is also based on collections, regardless of partnerships or the influence ratio. Although both sets of regulations serve different purposes, the following questions need to be asked in the context of the topic. How close can tax regulations be brought to financial reporting standards? When taking into account the principles that substantiate these regulations, how can these regulations be readdressed? The aim of this study is to explain the equity method and to discuss the applicability of the reporting principles within tax legislation.

Suggested Citation

  • Arif Ayluctarhan, 2022. "An Assessment of the Equity Method in Subsidiaries and Its Ability for Use in Tax Applications," Muhasebe Enstitusu Dergisi - Journal of Accounting Institute, Istanbul University Business School, vol. 0(67), pages 15-25, July.
    • Handle: RePEc:ist:imeder:v:0:y:2022:i:67:p:15-25
    DOI: 10.26650/MED.1134703
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    References listed on IDEAS

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    1. Maria Gee & Axel Haller & Christopher Nobes, 2010. "The Influence of Tax on IFRS Consolidated Statements: The Convergence of Germany and the UK," Accounting in Europe, Taylor & Francis Journals, vol. 7(1), pages 97-122, June.
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