(a) The regional electricity companies and the National Grid argued strongly against the ASB proposal to require full provisioning for deferred tax on fits revision of SSAP 15. Explain why these companies would have been so strongly opposed.

(b) Full provisioning for deferred tax would result in increased tax charges on earnings and large deferred tax liabilities, neither of which are likely to materialise. Explain (i) why they are unlikely to materialise, and (ii) howto reduce the impact while still following the principle of full provisioning.

(c) It has been stated that'by reducing distributable reserves the proposals directly affect not only annual dividends but also the apparent gearing position and balance sheet strength of companies. These proposals would do serious damage to the strength of an important sector of the economy,'4 Discuss whether the effect on distributable profit is an acceptable reason for not providing in full for deferred tax.LO10-1