Volume 2, No. 9


34% + 1% > 35%? The New Clinton and FASB Math For Corporate Taxes:  The Revenue Reconciliation Act of 1993 raised the marginal corporate tax rate by a mere 1%. However, the interplay between that retroactive tax increase and the "real-time" provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, will make for some very confusing third quarter 1993 tax provisions. Those provisions will include effects from revaluations of existing deferred tax assets and/or liabilities, a "catch-up" of tax on previous year-to-date income and also the tax on third quarter earnings at the higher rate. The mixture of these three tax elements will distort year-to-year comparisons, and perhaps befoul expectations. Furthermore, an examination of some consensus earnings estimates indicates that analysts may not yet have fully absorbed the effects of the tax change in their third quarter estimates. This report explains how third quarter tax provisions will be affected.

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