The Impact of Deferred Taxation on Banking Profitability and Capital Adequacy. Evidence from the Greek Banking System

Abstract

The need for a unified approach to businesses involved in the global economy and in particular in the financial markets around the world has been addressed by International Financial Reporting Standards (IFRSs), which are increasingly adopted by countries and especially in the banking field, which is also the main point of our research interest. In this paper we will look at one of the most important International Financial Reporting Standards, International Accounting Standard 12 (IAS 12), which deals with the accounting treatment of deferred income tax. We will present how IAS 12 accounts for deferred tax liabilities and receivables, and examine its application to the banking sector. Finally, we will investigate and compare with the help of the published financial statements of the Greek systemic banks and with the principle of application of International Financial Reporting Standards, deferred taxation and its effects on profitability and capital adequacy. So we will refer to the Greek case and see how the Greek banking system calculated and used deferred taxation.