Meaning of the term tax-planning strategy

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SFAS No. 109 uses the term "tax-planning strategy." The meaning of this term in the pronouncement is somewhat different from its usage in ordinary business conversation. Typically, one would expect the term tax-planning strategy to connote the actions management takes to minimize the enterprise's long-run tax obligation. An enterprise may, for example, structure its credit sales activities such that these sales would qualify for treatment as installment sales for tax purposes. Such an approach would allow the deferral of taxable revenue until cash is actually received. The use of the term tax-planning strategy in SFAS No. 109 differs from the traditional use, however.

Required:

Explain the meaning of the term "tax-planning strategy" as the term is used in SFAS No. 109.

Reference no: EM13765039

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