ASSESSING TAX CONSEQUENCES AND RISKS OF ANALYTICAL MISINTERPRETATION OF BOOK-TAX DIFFERENCES IN ARMENIAN ELECTRICITY-SECTOR COMPANIES

Abstract

This study examines the tax consequences of book-tax differences and the risk of analytical misinterpretation using 2016–2025 data from three Armenian electricity-sector companies. The empirical design combines effective tax rate reconciliation, cross-document reconciliation of current tax, a multi-stage reconciliation of net deferred tax positions, gross-versus-net deferred tax analysis, and a descriptive sensitivity measure for the use of carried-forward tax losses. The findings show that extreme effective tax rates should not be treated as stand-alone evidence of tax aggressiveness or elevated tax risk. In 5 of 30 company-year observations (16.7%), the year-to-year change in the net deferred tax position cannot be fully reconciled to deferred tax recognized in profit or loss alone. In 2022, High Voltage Electric Networks reported a net deferred tax liability of AMD 44.9 million while its gross deferred tax asset and liability balances totaled AMD 3.6 billion, illustrating the informational limitation of net presentation. In 8 of 15 observations involving the use of prior-period tax losses (53.3%), separating the carried-forward tax effect changes the inferred direction of the book-tax difference. The findings support a distinction between tax risk and the risk of analytical misinterpretation and provide the basis for a multi-stage book-tax reconciliation framework.