Major Differences Between the Set of Rules of Accounting and Fiscal Policies in Albania

Studying and interacting in dynamic and unstable economic environments of transitory post dictatorial economies makes every previous theory and previous study very often controversial. In this study we aim to bring a comparison between the set of accounting rules and fiscal policies. A specific focus will be on the most used and most practiced terms and voices, without making apart other parts that we rarely find in such economies. The importance of taxes and fiscal policies in non stable economies is a vital factor for the enhancement of the economy and the social development of the entire society. The information will be acquired through a mixed methodology: searching for information in literature, gathering of information from responsible authorities and interviewing key information specialists. This mixed methodology allows to obtain a deeper set of insights into this issue. Interviews were done with three auditors and other five chartered accountants, employed in private and public sector or were partners in large consulting practice


Methodology
The information was gathered through a mixed methodology: searching for information in literature, gathering of information from responsible authorities and interviewing key information specialists.This mixed methodology allows to obtain a deeper set of insights into this issue.
Interviews were done with three auditors and other five chartered accountants, employed in private and public sector or were partners in large consulting practice.
The results of the findings are provided next: The general concern was toward the taxation and how the move toward IFRSs would change the calculation of taxable income.

Assets-Property, plant and equipment
IFRSs: Must be estimated by reporting entity: Revaluation; Amortization, depreciation and depletion; Useful life.

Albanian tax rules:
The rate of amortization, depreciation is determined by tax law.

Assets -Intangible assets.
IFRSs: Must be estimated by reporting entity; Useful life; Amortization; Revaluation Albanian tax rules: The rate of amortization is 15 %, based on straight-line method.Revaluation not permitted for tax purposes.

Goodwill
IFRSs: To be tested for impairment; Albanian tax rules: Capitalized and amortized 15 % based on straight -line method.

Grants
IFRSs: Revenue based grants are deferred and matched as expense incurred.Capital grants are amortized as depreciation is recognized.
Albanian tax rules: Revenue is recognized when there is right to receive income upon the earlier of the income being due, paid and earned.

Impairments
IFRSs: IAS 16 and IAS 38 permit fixed assets and certain intangible assets to be carried at revalued amount.
Albanian tax rules: Impairment losses are not permitted for tax purposes.

Inventory
IFRSs: Valuation of inventories of goods could be:FIFO & Average cost; The inventory is stated at the lower cost or net realizable value LCM.
Albanian tax rules: Impairment losses are not permitted for tax purposes.

Profit tax
IFRSs: When certain conditions are met, a deferred tax is recognized and displayed as noncurrent in balance sheet.

Albanian tax rules:
The amount reported is the tax payable to tax authorities.Some expenses may not be allowable for tax purposes.

Revenue from Construction Contracts
IFRSs: Use of method of percentage of completion is required.When the final outcome cannot be estimated reliably, a zero-profit method is utilized.
Albanian tax rules: Revenue is recognized when there is right to receive income upon the earlier of the income being due, paid or earned.
The judgment of main areas of differences between two sets of rules is due to the recognition and the measurement criteria.The calculation of taxable profit begins with the profit calculated according to financial reporting rules.The professional accountants believed that the move toward IFRSs will increase the number and the type of adjustments needed to move from calculating accounting profit to the taxable profit.
Because of the large number of adjustments needed to be done, and the niche spaces there can be subjective profits.Maybe that is the reason that accountants spend a lot of time dealing with tax officers to settle their tax liabilities.
Tax liabilities are not the only factor that will change due to the changes of the accounting principles, other changes that will happen in a considerable way are also the financial statements analysis figures such as debt/equity ratio, the return on assets ratio etc.
The changes of the information in financial ration raises other question that will be treated below during the study.