Fiscal policy is an instrument used by the government to regulate state financial receipts and expenditures. Fiscal policy involves regulating taxes, subsidies, and government spending. The effect of fiscal policy is not only limited to economic aspects but can also influence company accounting practices.

Relationship between fiscal policy and accounting practice

There is a close link between fiscal policy and corporate accounting practices. Changes in fiscal policy, such as modifications to tax rates, fiscal incentives, or government spending policies, have a direct impact on measuring and reporting company finances. For example, if there is a decrease in the tax rate, the company will report higher net income. Fiscal incentives, such as a tax deduction for certain investments, can affect a company's revenue and expense recognition. In addition, government spending policies such as subsidies or stimulus programs also have the potential to affect the assets or liabilities reported by companies.

Effect of Fiscal Policy on Financial Measurement

The effect of fiscal policy on corporate financial measurements can occur through various mechanisms. One example is a change in tax rates. If there is a decrease in the tax rate, the company will report a higher net income. This positive impact can strengthen the company's image in the eyes of investors and financial analysts. Conversely, if the tax rate is increased, reported net income will decrease, which has the potential to reduce investor confidence.

In addition, the effect of fiscal policy can also be seen through the fiscal incentives given to companies. For example, the government provides tax incentives to encourage investment in research and development (R&D). In such a situation, companies have the option of recognizing R&D costs as current expenses or amortizing them over a certain period. These fiscal incentives can affect a company's decision regarding the recognition of R&D expenses and directly affect the profit reported in the financial statements.

Implications of Fiscal Policy on Financial Reporting

Fiscal policy can also impact a company's financial reporting. For example, if the government implements an economic stimulus policy aimed at the infrastructure sector, companies operating in that sector may experience a significant increase in their assets. This will be reflected in the company's financial statements and can provide a better picture of the company's performance and value.

In practice, changes in tax rates have a significant impact on the net income reported by companies. When the tax rate decreases, this can lead to an increase in the net income reported by the company. This positive impact can strengthen the company's image in the eyes of investors and financial analysts because higher earnings indicate better performance. Conversely, if the tax rate increases, this can have a negative impact on reported net income and reduce investor confidence in the company. Investors may perceive an increase in the tax rate as an additional burden that can reduce the company's profitability. Therefore, changes in tax rates play an important role in influencing investors' perceptions of firm performance and value.

Therefore, a good understanding of the effect of fiscal policy on accounting practices is very important for companies and accounting practitioners. The implications of fiscal policy on corporate financial measurement and reporting must be carefully considered so that decisions taken can reflect actual conditions and comply with relevant accounting standards. By paying proper attention to the effect of fiscal policy, companies can produce financial reports that are accurate and reliable, which in turn will provide a clearer picture of the company's financial performance. In addition, a good understanding of the effect of fiscal policy also assists accounting practitioners in identifying and managing the risks associated with changes in fiscal policy. Thus, monitoring relevant fiscal policies and adapting appropriate accounting practices can assist companies in maximizing the benefits of changes in fiscal policy and minimizing the potential negative impacts.