One of the big items in the financial statement released by Westpac yesterday was a tax adjustment of $685 million, after finalisation of tax consolidation related to the takeover of St George Bank in 2009. The adjustment was the biggest factor in the re-calculation of statutory net profit to arrive at cash earnings.The bank reported statutory net profit of $6.3 billion for the year to September, an increase of 84.2 per cent over the 2008/09 result. After making a number of adjustments for items that "do not reflect ongoing operations", the bank reported cash earnings of $5.9 billion - up 26 per cent over the previous year.When a company buys an asset it has a year in which to do the business combination accounting without any impact on the profit and loss. Within that year, any variance in the purchase price compared with the asset price is accounted for as a change to the value of goodwill. In year two and beyond, the adjustment goes to the P&L.Westpac reported last week that under tax consolidation rules it was required to reset the tax value of certain St George Bank assets.The assets in question were derivative contracts and at the time of consolidation, March 2009, they were assessed as having a higher market value than their original value.According to the bank, the complexity of the process meant that the tax treatment of the assets was only finalised with the Australian Taxation Office last month.The impact was a $685 million reduction in tax payable. Because the adjustment was finalised outside the one-year deadline it had to be included in the 2010 net profit.Tax accountants who spoke to Banking Day say Westpac has taken the appropriate action in this matter. The removal of the $685 million in the calculation of cash earnings is justifiable.The tax consolidation regime, which was introduced in 2002, was designed to simplify the tax arrangements of corporates by allowing them to file one tax return for all group companiesHowever, the rules added complexity when it comes to establishing a cost base for assets acquired.In June, a legislative amendment clarified some of the issues and, most likely, was the trigger for Westpac and the ATO to finalise their negotiations over the St George tax consolidation.Tax accountants say that if the rules had been clear in 2009 Westpac would have made the adjustment then, with no P&L consequence. On that basis, it is consistent to leave the item out of the calculation of cash earnings.But the situation highlights just how far large companies, including banks, have moved away from the goal of providing directly comparable financial statements based on IFRS standards.While the statutory numbers conform to IFRS requirements, banks have been basing results presentations on their "cash earnings" for several years. In the past year, they have also started adding "underlying earnings" to adjust for things like changes in impairment charges. Time for a review of  reporting standards?