The Pros and Cons of Income Tax Basis Accounting for Construction Contractors
The escalating complexity of financial statements prepared in accordance with generally accepted accounting principles (GAAP) has some owners of privately owned construction companies beginning to seriously question the benefits of preparing GAAP-basis statements in light of the rising cost of compliance.
Faced with such standards as FIN 46 and FIN 48, many construction contractors have felt punished under the consolidation requirements for what were believed to be good business and income tax planning decisions regarding the separate ownership of assets.
Consequently, many owners are now wondering about alternatives to GAAP. But these alternatives are not without their shortcomings, and could very well generate pushback from the users of a company’s financial statements.
