nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2006‒06‒24
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. "True and Fair view" ou le concept de l'image fidèle. By Jacqueline Haverals
  2. Towards New Empirical Versions of Financial and Accounting Models Corrected for Measurement Errors By Francois-Éric Racicot; Raymond Théoret; Alain Coen
  3. Financing Disability Benefits In A System Of Individual Accounts: Lessons From International Experience By Patrick Wiese
  4. The Choice Between Income and Consumption Taxes: A Primer By Alan J. Auerbach
  5. Equity Valuation Under Stochastic Interest Rates By Marco Realdon

  1. By: Jacqueline Haverals (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
    Abstract: Conformément à la quatrième Directive et à sa transposition en droit interne belge, l’objectif principal de la comptabilité est d’établir des comptes annuels qui reflètent une image fidèle de la situation financière et patrimoniale d’une entreprise. Cette contribution poursuit un double objectif, à savoir retracer l’historique du concept de l’image fidèle, traduction officielle de l’expression " true and fair view " empruntée aux comptables anglais et définir ses principaux attributs et caractéristiques dans les acceptions européennes et anglo-saxonnes. Elle s’articule autour des quatre sections suivantes : La première section retrace l’origine de l’image fidèle dans le droit comptable européen et le droit comptable belge. La deuxième section tente d’éclaircir la signification de cette notion qui, bien que reprise internationalement, n’a jamais été définie. La troisième section identifie et caractérise l’image fidèle au sein des courants comptables européen continental et anglo-saxon. La quatrième section conclut l’étude.
    Keywords: true and fair view, accounting, tax law.
    JEL: M41 H20
    Date: 2006–06
  2. By: Francois-Éric Racicot (Département des sciences administratives, Université du Québec (Outaouais) et LRSP); Raymond Théoret (Département de stratégie des affaires, Université du Québec (Montréal)); Alain Coen (Département de stratégie des affaires, Université du Québec (Montréal))
    Abstract: In this paper, we propose a new empirical version of the Fama and French Model based on the Hausman (1978) specification test and aimed at discarding measurement errors in the variables. The proposed empirical framework is general enough to be used for correcting other financial and accounting models of measurement errors. Removing measurement errors is important at many levels as information disclosure, corporate governance and protection of investors.
    Keywords: Asset pricing, portfolio selection, errors in variables, measurement errors, higher moments, instrumental variables, Specification test, corporate governance, protection of investors.
    JEL: C13 C19 C49 G12 G31
    Date: 2006–03–01
  3. By: Patrick Wiese (Center for Retirement Research)
    Abstract: In recent years, many countries with mandatory defined benefit pay-as-you-go (“PAYG”) systems have modified their systems to include individual accounts for financing retirement pensions. In most of these countries, a portion of the mandatory pension system’s contribution rate has been “carved-out”, and contributions earmarked by the carve-out are channeled into retirement accounts. Upon reaching retirement age, the contributions and accumulated interest in an individual’s account are used to finance all or part of that individual’s total retirement pension. Although an individual account may be a useful vehicle for financing retirement income, it may not prove sufficient for financing disability benefits. In a pension system that depends solely or partly on individual investment accounts, individuals who become disabled at a young age might lack sufficient capital in their individual accounts to finance adequate disability pensions. Generally, therefore, the implementation of “carveout” accounts for financing retirement benefits will necessitate changes to the financing mechanism for disability benefits. A wide range of policy options exists for adapting disability benefits to operate in a pension system with carve-out retirement accounts. The purpose of this paper is to examine how countries with carve-out individual retirement accounts have approached disability reform, and to assess the applicability of these approaches in the United States.
    Keywords: financing, retirement, pensions
    Date: 2006–06–12
  4. By: Alan J. Auerbach
    Abstract: It has now been nearly three decades since the publication of two important volumes that laid out many of the details of how one might implement a progressive consumption tax (Institute for Fiscal Studies, 1978; U.S. Treasury, 1977). Over the years since, many contributions have analyzed the mechanics of the different variants of consumption taxation, the potential efficiency and distributional effects of their adoption, the issues of administration and transition from the current tax system, and the problems relating to certain types of transactions. But much of what we “know” is not part of the general policy discussion and there are important issues that the literature has recognized but still not resolved. The aim of this paper is to lay out the key economic issues involved in deciding whether and how to adopt a consumption tax and to discuss what theory and evidence have told us and could tell us about these issues.
    JEL: H20
    Date: 2006–06
  5. By: Marco Realdon
    Abstract: This paper presents an equity valuation model that employs risk-neutral valuation under stochastic interest rates along the lines of Ohlson and Feltham (1999). Closed form valuation formulae for equities are presented in a discrete time setting whereby the short term interest rate is modelled by a quadratic term structure model. Earnings are driven by mean reverting return on equity (ROE). The term strcture of interest rates, and in particular the variance of the future short rates, is found to be a primary dterminant of equity value tat has been largely overlooked by the previous equity valuation literature. Equity value decreases in the correlation between the short interest rate and ROE and can be very sensitive to such correlation when the ROE process is very persistent. This suggests that equity value dreceases in the degree of pro-cyclicality of the firm's profitability.
    Keywords: Equity valuation, residual income valuation, stochastic interest rates, quadratic term structure model in discrete time, mean reverting return on equity
    JEL: G12 G13 M41
    Date: 2006–06

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