nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒09‒25
three papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Impact of Mandatory IFRS Adoption on Conditional Conservatism in Europe By Paul André; Andrei Filip; Luc Paugam
  2. Distortive Effects of Dividend Taxation By Lindhe, Tobias; Södersten, Jan
  3. Marginal Taxation of Labor Income in Sweden from 1862 to 2010 By Du Rietz, Gunnar; Johansson, Dan; Stenkula, Mikael

  1. By: Paul André (Accounting / Management Control Department - ESSEC Business School); Andrei Filip (Accounting / Management Control Department - ESSEC Business School); Luc Paugam (Accounting / Management Control Department - ESSEC Business School, DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: We study the effect of the mandatory adoption of IFRS in Europe in 2005 on conditional conservatism. To capture conditional conservatism, we use three measures: the Basu (1997) measure, the Khan and Watts (2009) measure, and a measure controlling for potential shifts in unconditional conservatism and cost of capital after the adoption of IFRS. From a sample of 7,251 firm-year observations drawn from 16 European countries, we document an overall decline of the degree of conditional conservatism across our three measures. While there is no change in weak enforcement/governance countries which remain less conditionally conservative than strong enforcement/governance countries, the latter exhibit a significant decrease. Further, we demonstrate that the decline is more significant for firms carrying intangible assets and goodwill in their balance sheets, items for which impairment tests rely on unverifiable fair value estimates. We argue that IFRS are conceptually conditionally conservative but that inappropriate application of conditional conservatism principles may have prevented financial reporting from reaching the level of conservatism targeted by the IASB.
    Keywords: Conditional Conservatism ; IFRS ; Europe ; Enforcement, Governance ; Intangibles ; Impairment
    Date: 2013
  2. By: Lindhe, Tobias (Uppsala center for fiscal studies); Södersten, Jan (Department of Economics)
    Abstract: This paper examines how the distortions caused by dividend taxation depend on whether or not shareholders can recover their original equity injections without being subject to the dividend tax. We point out the alternative assumptions in the literature on this, and we compare two different tax regimes, one where it is impossible for the firm to pay cash to its shareholders that is not taxed as dividends, the other where the shareholders are allowed a tax-free return of the original capital contributed through new issues. Our analysis shows that the regimes imply a substantial difference to our perceptions of the distortive effects of dividend taxation.
    Keywords: dividend taxation; share repurchases; equity trap; cost of capital; nucleus theory; growth path
    JEL: H24 H25 H32
    Date: 2013–09–04
  3. By: Du Rietz, Gunnar (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper presents annual Swedish time series data on the top marginal tax wedge and marginal tax wedges on labor for a low, average and high income earner for the period 1862 to 2010. We identify four distinct periods separated by major tax reforms. The tax system can be depicted as proportional, with low tax wedges until World War II. Next follows a period featuring increasing tax wedges beginning in connection with World War II. During the third period, starting with the 1971 tax reform and continuing throughout the 1980s, the efforts to redistribute income culminated and tax wedges peaked. The high income earner started to pay the top marginal tax wedge which could be 90 percent. The main explanations for this development are temporary crises leading to permanent tax increases, expansion of the public sector and distributional ambitions, bracket-creep and the introduction of social security contributions paid by the employers. The 1990–1991 tax reform represents the beginning of a new and still continuing period with decreasing marginal tax wedges.
    Keywords: Labor taxation; Marginal tax rate; Marginal tax wedge; Tax reforms
    JEL: H21 H31 N44
    Date: 2013–09–19

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