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on Accounting and Auditing |
| By: | Julia Coronado; Olivia S. Mitchell; Steven A. Sharpe; S. Blake Nesbitt |
| Abstract: | Some research has suggested that companies with defined benefit (DB) pensions are sometimes significantly misvalued by the market. This is because the measures of pension cost and pension net liabilities embedded in financial statements, taken at face value, can provide a very misleading picture of pension finances. The more pertinent information on pension finances is relegated to footnotes, but this might not receive much attention from portfolio managers. But dramatic swings in the financial conditions of large DB plans around the turn of the decade focused widespread attention on pension accounting practices, and dissatisfaction with current accounting standards has recently prompted the Financial Accounting Standards Board (FASB) to take up a project revamp DB pension accounting. Arguably, the increased attention should have made investors wise to the informational problems, thereby eliminating systematic mispricing in recent years. We test this proposition and conclude that investors continued to misvalue DB pensions, inducing sizable valuation errors in the stock of many companies. Our findings suggest that FASB’s current reform efforts could substantially aid the market’s ability to value firms with DB pensions. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-04&r=acc |
| By: | Jean-Yves Duclos; Bernard Fortin; Andrée-Anne Fournier |
| Abstract: | This article draws up a portrait of effective marginal tax rates (EMTRs) on labour income in Quebec. It aims at allowing a better understanding of the impact of tax policy on the behavior of economic agents. Using an accounting microsimulation model that reproduces the system of taxes and transfers in 2002 Quebec, we measure the EMTRs that result from the interaction of the mechanisms of income taxation and redistribution. Moreover, we evaluate the distribution of EMTRs in the population. The analysis of EMTRs shows, inter alia, that family policy, whose assistance is targeted towards low-income families, generates high levels of EMTRs ascribable to the generally fast reduction of transfers as income increases. More than a quarter of heads of single-parent households face an EMTR which can reach, and even exceed, 80%. As for the two-parent families, they mostly face EMTRs of around 50%. We show the importance of accounting for EMTR heterogeneity, both with respect to types of families and levels of incomes, as well as evaluating the variability of EMTRs in the population. |
| Keywords: | Effective tax rates, taxation, microsimulation, family policy |
| JEL: | D31 D63 H21 H24 I38 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0746&r=acc |