nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2009‒05‒02
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Taxation and Accountancy of Luncheon Voucher By Ciumag, Marin
  2. The effects of stock options accounting regulation on corporate governance: A comparative European study By Butzbach, Olivier; Di Carlo, Ferdinando
  3. The Role of Batch Costing and Cost Accounting in the Managerial Process By Ciumag, Marin; Ciumag, Anca
  4. The Justifying Documents – the Accounting Registration Base of the Works and Services Executed By Third Parties By ciumag, marin; ciumag, anca
  5. Limiting audit firms’ liability: A step in the right direction? (Proposals for a new audit liability regime in Europe revisited) By Ojo, Marianne
  6. Intangible Capital and the "Market to Book Value" Puzzle By Charles Hulten; Janet Hao
  7. The Indicators from the Financial Structure of the Balance Sheet By ciumag, marin; ciumag, anca
  8. Corporate Income Tax and Economic Distortions By Gaetan Nicodeme
  9. Accounting for the Knowledge Economy By Charles Hulten
  10. Fiscal Taylor Rules in the Postwar United States By Christopher Reicher

  1. By: Ciumag, Marin
    Abstract: Accounting represent a privilege source of information for the fiscal bodies, the majority of fiscal obligations are being established on the basis of accounting data. There is interdependency between accounting and taxation, which is defining in the fiscal management of the enterprise. The accountancy is an element intended for obtaining pure and objective information, and therefore the intervention of taxation in accounting procedures is unacceptable. But accounting isn't perfect and therefore the fiscal body proposes itself t, as a user of the same information, to interpret them according to own interests
    Keywords: lucheon voucher; taxation; accountancy; fiscal obligations; fiscal management
    JEL: E62 O23 M41 H87 E63
    Date: 2008–04–20
  2. By: Butzbach, Olivier; Di Carlo, Ferdinando
    Abstract: The use of stock options as executive compensation, after having developed in the United States in the 1980s and 1990s, has spread to continental Europe in the past fifteen years. The increasing weight of stock options in this region of the world raises various issues and feeds a vast literature dealing with the relationship between corporate managers’ pay and performance. A good chunk of that literature is based on agency theory. In this line of thought a principal (the shareholder) delegates the management of the firm to an agent (the manager) and simultaneously sets up a series of control devices to make sure that the agent will act in his (the shareholder’s) interest (Jensen and Meckling, 1976). Agency theory does not limit itself with identifying potential conflicts of interests between managers and shareholders: it also explores the various means through which the firm’s owners try to make sure that managers seek to maximize their (the owners’) objectives. Optimal contracting theory precisely aims at identifying such means. According to that theory, the firm’s compensation policies should contribute to align the managers’ interests on those of the shareholders – to make sure, in other words, that the agent behaves in the interest of the principal (Murphy, 1999). Such a view, applied to executive compensation plans, has been recently exposed to a strong scepticism. The optimal contracting theory has a weak empirical basis, especially when applied to stock options – whose adoption does not seem to lead to a significant improvement of firms’ corporate governance. Several authors have underlined the importance of “pay without performance” (Murphy, 1999). Most empirical studies cannot find a positive relationship between the adoption of stock option plans and a significant improvement in firms’ performance. Several explanations have been proposed to explain that puzzle (such as, for instance, Bebchuk & Fried, 2004), all linked to rent extraction theory. According such theory, managers extract a rent from their position: concretely, they increase their capacity to change their own remuneration. In this scheme, stock-options, by nature, cannot succeed in aligning the agent’s interests on the principal’s; on the contrary, they strengthen or create new agency problems. This discussion can be linked to the theme of stock-options accounting and disclosure, which has been recently transformed by the adoption of international accounting standards in most developed economies. Indeed, according to the IFRS 2, stock-options are to be accounted for as labour costs, implying an increase of net liabilities within a specific reserve, with a value equal to the fair value of the options. This accounting method breaks significantly with the past, when disclosure of stock-options plans were left to the discretion of firms. Such a change in disclosure rules might have an impact on the corporate governance of European firms. Indeed, according to a growing literature (see Verrecchia, 2001, for an exhaustive review), disclosure (which can be defined as the publication of previously private relevant information) mediates the relation between a firm’s owners and managers. When disclosure is failing, corporate governance worsens, in that managers are able to hide the decisions which damage or threaten owners’ interests. In fact, in the current context, characterized by national and international regulatory reforms in favour of a more stringent disclosure, the academic discussion has shifted its focus from the causes to the consequences of disclosure, especially related to corporate governance (see Bushman & Smith, 2001). Turning the previous reasoning on its head, one can argue that, in presence of information asymmetries and agency conflicts between owners and managers, disclosure acquires a strategic value (Healy & Palepu, 2001). In particular, a better disclosure could help reduce contractual problems linked to agency relations (Lo, 2003), through, for instance, corporate reputation. In the (international) context of the adoption of more stringent norms on stock option disclosure (that is their recognition, meaning, as seen above, accounting stock-options as costs in a firm’s financial statement), both discussions are relevant. The new disclosure of stock-options could help reduce the risks of rent extraction tied to that form of compensation and bring them closer to their role as incentives assumed in the optimal contracting theory. The aim of the present work is to understand whether the aforementioned change in stock option accounting regulation has had an impact, and what impact, on the corporate governance of European firms, in the light of the twin literatures cited above. The sample considered here includes all listed Italian and French firms, excluding financial institutions, which have carried out stock option plans in 2005 and 2006, and therefore underwent the change in accounting regulation mentioned above. The analysis relies on qualitative and quantitative data, and focuses on a few key indicators. The findings of the present research suggest that the impact of new accounting rules and more stringent disclosure on listed French and Italian firms is not significant. The firms under study have not shown any substantial change in their management or governance structure, which appear to be still largely driven by the peculiar power distribution proper to each country. Besides, such firms have not received any market premium for introducing executive compensation schemes that theoretically provide incentives for top management to maximize owners’ interests. In any event, those plans remain a minority among listed firms. One could argue, therefore, that in Italy and France, like other countries in the world and the United States in particular, stock options plans have become another instrument used by executive managers to obtain higher remuneration with no link to the true performance of the firm and the interests of its owners. Such a logic is much closer to the rent extraction theory mentioned above (see, for the US, Dechow, Sutton, Sloan, 1996).
    Keywords: Stock-options; accounting; corporate governance; pay and performance; disclosure
    JEL: M41 K00 G34
    Date: 2008–11–15
  3. By: Ciumag, Marin; Ciumag, Anca
    Abstract: Starting from the premises that the informational system is a part of the management system of any company, it is always stated, completely rightly that the effectiveness of an company strictly related to the way in which this knows how to manage the information. One of the problems the economic agents encounter nowadays is the lack of some coherent and well structured information that should assist the managerial decision at a superior level, as well as at inferior echelons. Once with the stimulation and amplification of the company’s competences in using the appropriate economic indicators of a market economy which is reflected in the increasing number and difficulty of decisions, we think that one of the basic elements, that have a determining influence in the decisional process, is the cost and the cost information.
    Keywords: batch costing; cost accounting; managerial process; the managerial accountancy
    JEL: M41 M4
    Date: 2008–11–22
  4. By: ciumag, marin; ciumag, anca
    Abstract: The data and information support are made from justifying documents, account books, financial situations and periodical account reports, electronic bearers (bands and magnetic disks, CDs, and floppy disks). Some of these supports assure, in a first stage, the data collection, meaning their consignment (registration) and their preparation for processing, operation which has as a result the obtaining of the information itself which is stored for transmission to their users, usually using other supports than those designed for the data collection. The accounting, according to its object of study, has the obligation to observe, to record and to provide for analysis and control information corresponding to the cycle stage of production or conduct of business specific to the economic entity. These extremely complex tasks, with quantitative and qualitative implications are materialized in: registration of the economic facts, phenomena and processes; the information processing; the information storage; the economic operations control and the information centralization.
    Keywords: data and information support; justifying documents; the printed documents; the nomenclature of documents
    JEL: M41 Q56
    Date: 2008–02–18
  5. By: Ojo, Marianne
    Abstract: This paper considers the responses of six audit firms, to the four options presented by the European Commission in reforming auditors’ liability. Whilst agreeing with a limitation in audit firms’ liability, it does not consider the means of limitation, as provided by the European Commission in its Recommendation, to be the best means of limiting auditors’ liability. In proposing a means whereby not only a limitation of audit firms’ liability can be achieved, but also one which would serve as a better means of facilitating harmonisation, the paper makes reference to the variants presented in the author’s paper “Proposals For a New Audit Liability Regime”, namely a combination of the first and third options. Further, the wide scope permitted by the Commission in leaving it to Member States to decide upon the appropriate method for limiting liability and the means of limiting liability, as the paper will seek to illustrate, do not present the best opportunities in realising the goal of harmonisation.
    Keywords: Audit;Liability;Proposals;Europe
    JEL: K2 M42
    Date: 2009–04–27
  6. By: Charles Hulten (University of Maryland and NBER and The Conference Board); Janet Hao (The Conference Board)
    Abstract: Intangible Capital and the "Market to Book Value" Puzzle
    Date: 2008–06
  7. By: ciumag, marin; ciumag, anca
    Abstract: The competition frame of the market economy determines the businesses, which don’t manage to impose themselves through quality, competitiveness and efficiency, and for whom there is not possible a straightness in permissible terms, to become insolvent and, therefore, to be eliminated from the „arena” of the economical life. According to these circumstances, any form is interested, in its highest degree, to obtain detailed information regarding the economic-financial indicators obtained in a financial exercise. These indicators can be calculated on the basis of the data contained in the annual balance sheet, by regrouping and restructuring the positions from the balance sheet, the results account and the appendix form the balance sheet. The main category of analysing indicators that can be calculated is referring to the indicators of financial structure.
    Keywords: balance sheet; financial structure; indicators; efficiency
    JEL: P43 G32 F36
    Date: 2008–11–23
  8. By: Gaetan Nicodeme (European Commission)
    Abstract: As any non-lump-sum tax, corporate income taxation creates distortions in economic choices, reducing its efficiency. This paper reviews some of these domestic and international distortions and their most recent estimates from the economic literature. Distortions originating from income shifting between capital and labour sources, profit shifting across jurisdictions, the effects of taxation on business location and foreign direct investment are the major sources of distortions.
    Keywords: European Union, Corporate taxation, distortions, tax efficiency.
    JEL: H25
    Date: 2009–04
  9. By: Charles Hulten (University of Maryland / The Conference Board)
    Abstract: Part of the Supplemental Materials for INNOVATION AND U.S. COMPETITIVENESS, The Conference Board report #R-1441-09-RR. About the Report: The Conference Board has recently undertaken a project on innovation and competitiveness, with funding from Microsoft Corporation. The goal of the project is to provide an overview of the current state of knowledge on the nature of innovation, and its role in stimulating economic growth and improved living standards in the U.S. The project draws on experts across the academic, corporate, and policy arenas, in addition to The Conference Board’s own analysis, surveys, and focus groups of the business community. Such experts met in February 2007 to present and discuss various aspects of the innovation process and measurement thereof. Each presenter wrote a summary piece focusing on his respective area of expertise. These summary documents underpin the content in Innovation and U.S. Competitiveness; however the conclusions drawn are those of The Conference Board alone. These papers are retained for reference in The Conference Board Economics Program Working Paper Series.
    Date: 2008–12
  10. By: Christopher Reicher
    Abstract: Recent research and events have brought fiscal policy back into the spotlight. Fiscal Taylor rules and error correction models have represented two different ways of quantifying the feedbacks from fiscal and economic conditions to fiscal policy decisions. This paper synthesizes these two ideas, estimating a fiscal Taylor rule as a special case of an error correction model. Using quarterly postwar U.S. data, estimates of a fiscal Taylor rule find that the government sector has sought to stabilize its debt through adjustments to purchases and taxes, in that order, with very little stabilization coming through adjustments to transfer payments. Since 1981, the debt-stabilization motive has almost vanished, while the cyclical behavior of fiscal variables has not changed. This provides indirect evidence that fiscal policy may have become “non-Ricardian” in the US during recent decades
    Keywords: Taxation, government spending, transfer payments, fiscal policy, deficits, fiscal Taylor, Rule
    JEL: E62 E63 H62 H63
    Date: 2009–04

This nep-acc issue is ©2009 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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