International Financial Reporting Standards - Effects on Swedish taxation

Abstract: The aim of this thesis is to examine the legal situation with regard to the IFRS-transition in Sweden. Sweden has a close linkage between accounting and taxation, which means that accounting rules have a material impact on taxation. IFRS currently applies only on group level, and the group is not subject to tax. However, there are already indirect tax effects to be seen since accounting practice in Sweden has changed due to IFRS. The most significant potential effect on taxation in a Swedish context is fair valuation of certain assets. If IFRS is applied on legal-entity level under current tax rules, unrealized gains would set the realization principle and the principle of economic double taxation out of play. Therefore, the linkage is threatened by IFRS’s accounting philosophy and is currently subject to scrutiny by an investigating committee that will issue a solution in 2007.