U.S. and Japanese Tax Laws
Tax laws in Japan tie taxable income directly to the financial statements’ reported income. That is,to compute a Japanese firm & rsquo;s tax liability, multiply the net income as reported to shareholders by the appropriate tax rate to derive the firm’s tax liability. In contrast, U.S. firms typically have more discretion in choosing different accounting procedures for calculating net income for shareholders (financial reporting) and taxes. What effect would you expect these institutional differences in tax laws between the United
States and Japan to have on internal accounting and reporting?
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