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Accounting for deferred taxes: New underwriting standards needed

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  • LaDue, Eddy
  • Collins, John

Abstract

The Farm Financial Standards Council recommends that deferred taxes be included on market value balance sheets. This inclusion generally increases liability and reduces farm equity. To illustrate the kind of new standards that will be needed, changes in ratio standards were calculated for a group of New York dairy farms and part of a Michigan loan portfolio. Anecdotal evidence suggests that ratio changes will be of a similar magnitude for many other farm types and regions. When farmers and lenders recognize the importance of deferred taxes and include them on balance sheets, they must also recognize the need for some new ratio standards to evaluate the financial position of businesses.

Suggested Citation

  • LaDue, Eddy & Collins, John, 1997. "Accounting for deferred taxes: New underwriting standards needed," American Bankers Association, American Bankers Association > Journal of Agricultural Lending, vol. 10(2).
    • Handle: RePEc:ags:abajal:336378
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    File URL: https://ageconsearch.umn.edu/record/336378/files/ers2022-23-0333.pdf
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