nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒09‒29
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Truthfulness in accounting: How to discriminate accounting manipulators from non-manipulators By Alina Beattrice Vladu; Oriol Amat; Dan Dacian Cuzdriorean
  2. Dynamic effects of anticipated and temporary tax changes in a R&D-based growth model By Kizuku Takao
  3. The distributional effects of personal income tax expenditure By Avram, Silvia
  4. An average-based accounting approach to capital asset investments: The case of project finance By Carlo Alberto Magni
  5. Financial Reform in Australia and China By Alexander Ballantyne; Jonathan Hambur; Ivan Roberts; Michelle Wright

  1. By: Alina Beattrice Vladu; Oriol Amat; Dan Dacian Cuzdriorean
    Abstract: Preparers of accounting information are in a position to manipulate the view of economic reality presented in this information to interested parties. These manipulations can be regarded as morally reprehensible because they are not fair to users, they involve an unjust exercise of power, and they tend to weaken the authority of accounting regulators. This paper develops a model for detecting earning manipulators using financial statements ratios in a sample of Spanish listed companies. Our results provide evidence that accounting data can be extremely useful in detecting manipulators. This approach can be used by a large category of users of accounting information among them we can cite the stock exchange supervisors or investing professionals.
    Keywords: accounting ethics, accounting manipulation, accounting users, earnings management, financial reporting
    JEL: M1
    Date: 2014–08
  2. By: Kizuku Takao
    Abstract: Tax changes are often announced before their implementation and are not permanent, but rather only temporary. Accordingly, R&D firms will optimally adjust their investment decisions to fit tax schedule changes. This study analyzes how changes in various tax rates relevant to corporate activities affect growth and welfare, considering their methods of implementation. For this purpose, we consider adjustment costs involved in the investment process and allow firms to make a forward looking investment decision in a R&D-based endogenous growth model. Calibrating the model with U.S. data, we find that a dividend tax cut reduces the level of welfare irrespective of implementation method. On the other hand, a capital gains tax cut and a rise in the R&D tax credit rate enhance the level of welfare irrespective of implementation. However, the announcement of these tax changes prior to implementation reduces their effectiveness.
    Date: 2014–08
  3. By: Avram, Silvia
    Abstract: Using EUROMOD, this study investigates the size and distributional effects of tax allowances and tax credits in 6 European countries. It also examines whether instrument design matters in shaping the redistributive effect, paying attention to both categorical and explicit income targeting .With few exceptions the impact of tax allowances and tax credits on inequality is small. Tax credits are generally more progressive than tax allowances. The design of the allowances/credits appears to be less important than the characteristics of the population they are targeting and/or other features of the income tax system in determining the redistributive effect. Consequently, tax concessions appear ill-suited to target resources towards households in the bottom part of the income distribution.
    Date: 2014–07–15
  4. By: Carlo Alberto Magni
    Abstract: Literature and textbooks on capital budgeting endorse Net Present Value (NPV) and generally treat accounting rates of return as not being reliable tools. This paper shows that accounting numbers can be reconciled with NPV and fruitfully employed in real-life applications. Focusing on project finance transactions, an Average Return On Investment (AROI) is drawn from the pro forma financial statements, obtained as the ratio of aggregate income to aggregate book value. It is shown that such a metric correctly captures a project’s economic profitability, as long as it is compared with a comprehensive Weighted Average Cost of Capital that includes a correction factor which takes account of the capital foregone by the investors. Contrary to the Internal Rate of Return, AROI is unique and we provide an explicit functional relation which links it to the NPV. The approach holds for levered and unlevered projects, constant and non-constant leverage ratios, constant and non-constant WACCs.
    Keywords: Return On Investment, capital budgeting, lost capital, average, financial accounting, project finance
    JEL: M4 G31
    Date: 2014–09
  5. By: Alexander Ballantyne (Reserve Bank of Australia); Jonathan Hambur (Reserve Bank of Australia); Ivan Roberts (Reserve Bank of Australia); Michelle Wright (Reserve Bank of Australia)
    Abstract: This paper describes the Australian experience of domestic financial deregulation, capital account liberalisation and the float of the exchange rate, and provides a comparison to China's current efforts to reform its own financial system. In doing so, it considers similarities and differences in the circumstances facing the two economies. Australia's financial reforms were essential, in the longer term, for building a stronger economy and more robust financial system, but the paper does not interpret the Australian experience as a prescription for financial reform in China. Indeed, the specific sequencing of deregulation that occurred in Australia might not be optimal in a Chinese context, although it is likely that the reforms themselves, pursued with appropriate caution, would have long-run benefits for the Chinese economy.
    Keywords: financial deregulation; financial development; China; Australia
    JEL: E44 G18 O53 O56
    Date: 2014–09

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