This paper demonstrates that (time- and context-specific) ‘political costs' were instrumental in the entry of deferred tax accounting into Australian GAAP in the early 1970's—a period in which high profits and low corporate taxes coincided in a volatile political mix. Politically exposed companies (of large size, with low effective tax rates, particularly in the mining industry) with the ability to reduce their exposure through deferred tax accounting (if it was tax-expense increasing), adopted the method. Companies for whom adoption would be tax-expense reducing, either deferred adoption to a less politically sensitive period or adopted with the average impact being such as to not lower their reported tax rate below that of the average rate of non-adopters.
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