The impact of accounting conservatism and fair value on taxable income: An applied study on industrial companies in the Libyan business environment

Abstract

This study aims to identify the impact of accounting conservatism and fair value on taxable income in Libyan private sector industrial companies. A field study was conducted among tax officials in Benghazi and accounting staff in these companies. The study employed a descriptive-analytical approach, and data was collected using a questionnaire designed specifically for this purpose. The study population consisted of 150 tax officials in Benghazi and 120 accounting staff in Libyan private sector industrial companies. The questionnaire was then distributed to a sample of 108 employees and 92 companies.  The Statistical Package for the Social Sciences (SPSS) was used to analyze the data, employing a range of descriptive and inferential statistical methods. The study reached a number of conclusions, most notably the acceptance of all sub-hypotheses at a significance level of 0.05, using a one-sample t-test. This means acceptance of the main hypothesis, which states that "the use of accounting conservatism and fair value in preparing the financial reports of industrial companies in the Libyan private sector affects their taxable income." The study also found an effect of the two independent variables—"the participants' (tax administration employees and company accountants) understanding of the concept and importance of accounting conservatism" and "companies apply accounting conservatism in their financial reports prepared for tax purposes"—on the dependent variable, "the effect of practicing accounting conservatism in financial reports prepared for tax purposes." Conversely, the study found no effect of the two independent variables—"the participants' (tax administration employees and company accountants) understanding of the concept and importance of fair value" and "companies apply fair value in their financial reports prepared for tax purposes"—on the dependent variable, "the effect of practicing fair value in financial reports prepared for tax purposes." This fulfills the study's objective.