nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒12‒28
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Accounting for Oil and Gas Exploration Activities: A Triumph of Economics over Politics By Misund, Bård
  2. Tax reforms in EU Member States - 2015 Report By European Commission
  3. Tax shifts By Milena Mathé; Gaetan Nicodeme; Savino Rua
  4. The Value Relevance of Accounting Figures in the Oil & Gas Industry: Cash Flow or Accruals? By Misund, Bård; Osmundsen, Petter
  5. Colonial Virginia’s Paper Money Regime, 1755-1774: a Forensic Accounting Reconstruction of the Data By Farley Grubb
  6. Corporate Governance and Blockchains By David Yermack
  7. Financial Cycles and Fiscal Cycles By Agustín S. Bénétrix; Philip R. Lane
  8. Norwegian gross domestic product by industry 1830 - 1930 By Ola Honningdal Grytten
  9. Investment Returns: Defined Benefit vs. Defined Contribution Plans By Alicia H. Munnell; Jean-Pierre Aubry; Caroline V. Crawford
  10. Accounting for Natural Capital in Productivity of the Mining and Oil and Gas Sector By Wang, Weimin; Adams, Patrick

  1. By: Misund, Bård (UiS)
    Abstract: For more than 40 years oil and gas companies have been able to choose between two competing methods for accounting for exploration activities. The literature suggests that accounting method discretion can potentially signal managements' private information with the benefit of improving the relevance of accruals for forecasting future cash flows. However, if accounting method flexibility is used for financial window-dressing, accruals can lose their value-relevance and investors will resort to cash flows measures instead. In this study we compare the value-relevance of earnings versus cash flow for oil and gas companies from 1992 to 2013. Our results suggest that earnings are not significant, independent of accounting method choice, consistent with the view that accruals have limited value in the oil and gas industry. Rather, it seems that cash flow measures of both current and future profitability are significantly associated with oil company returns. These findings suggest that the financial markets lack confidence in oil company earnings, irrespective of accounting method choice.
    Keywords: Full cost versus successful efforts; oil and gas company valuation; petroleum accounting; value-relevance.
    JEL: G12 M40 Q33
    Date: 2015–12–18
  2. By: European Commission (European Commission)
    Abstract: The 2015 report on Tax Reforms in EU Member States presents an overview of the reforms recently introduced by Member States in the main areas of tax policy and provides up-to-date analysis of the main challenges in each area. It also includes an indicator-based assessment, which gives an initial indication of Member States’ performance in each area
    Keywords: European Union, Taxation, European Semester, VAT, Coporpotate income tax, tax administration, tax reform
    JEL: H21 H22 H23 H25 H27 H62
    Date: 2015–09
  3. By: Milena Mathé (European Commission); Gaetan Nicodeme (European Commmission, ULB, CESifo, CEPR); Savino Rua (European Commission)
    Abstract: Shifting taxes away from labour to tax bases which are considered least detrimental to growth remains a common policy recommendation from the European Commission and other international institutions. This paper reviews the theoretical and empirical literature on the growth effects of tax shifts. It then takes stock of tax shifts in the EU Member States over the last years, giving a few examples of their implementation and of the hurdles Member tates have faced. Finally, it concludes on recent developments that may impact on the nature of future tax shifts
    Keywords: European Union, Taxation, Growth, Tax shift, labour taxation, VAT, redistribution
    JEL: H20 H30 N14 P35
    Date: 2015–10
  4. By: Misund, Bård (UiS); Osmundsen, Petter (UiS)
    Abstract: This paper studies financial statement information from the largest oil and gas companies and evaluates their relation to firm market value. The accounting literature states that an important feature of financial statements and, in particular net income, is the usefulness for predicting future cash flows. However, financial analysts covering this sector prefer a number of alternative non-GAAP income measures to disclosed net income. Using a dataset of 72 largest integrated and exploration and production companies (E&Ps) during 1993-2013, we examine the relative value-relevance of net income versus eight alternative profitability measures. Despite the analyst preference for non-GAAP measures, our results suggest that net income is the most value relevant earnings measure for integrated oil & gas companies. By contrast, cash flow measures dominate for exploration and production companies. However, we find that free cash flow, which many oil company analysts refer to these days, has low value relevance.
    Keywords: Company Valuation; Value-relevance; Financial Analysts; Oil & Gas Industry
    JEL: G12 M21 M40 Q49
    Date: 2015–12–18
  5. By: Farley Grubb
    Abstract: I reconstruct the data on Virginia’s paper money regime using forensic accounting techniques. I correct the existing data on the amounts authorized and outstanding. In addition, I reconstruct yearly data on previously unknown aspects of Virginia’s paper money regime, including printings, net new emissions, redemptions and removals, denominational structures, expected tax revenues, and specie accumulating in the treasury for paper money redemption. These new data form the foundation for narratives written on the social, economic, and political history of Virginia, as well as for testing models of colonial paper money performance.
    JEL: C82 E51 N11
    Date: 2015–12
  6. By: David Yermack
    Abstract: Blockchains represent a novel application of cryptography and information technology to age-old problems of financial record-keeping, and they may lead to far-reaching changes in corporate governance. During 2015 many major players in the financial industry began to invest in this new technology, and stock exchanges have proposed using blockchains as a new method for trading corporate equities and tracking their ownership. This essay evaluates the potential implications of these changes for managers, institutional investors, small shareholders, auditors, and other parties involved in corporate governance. The lower cost, greater liquidity, more accurate record-keeping, and transparency of ownership offered by blockchains may significantly upend the balance of power among these cohorts.
    JEL: G20 G3
    Date: 2015–12
  7. By: Agustín S. Bénétrix (Department of Economics, Trinity College Dublin); Philip R. Lane (Central Bank of Ireland, Trinity College Dublin and CEPR)
    Abstract: There is an extensive literature on the behaviour of fiscal variables vis-a-vis the output cycle. We show that fiscal variables also co-vary with the financial cycle, as captured by fluctuations in the current account balance and credit growth. These financial factors affect fiscal outcomes, over and above their influence on the output cycle. We argue that fiscal surveillance and the design of fiscal rules should pay close attention to the interaction between the financial cycle and the fiscal cycle.
    Date: 2015–12
  8. By: Ola Honningdal Grytten (Norwegian School of Economics)
    Abstract: The present paper offers new knowledge of historical national accounting in Norway in several ways. Firstly, a new and novel set of annual gross domestic product series by industry are presented for the period 1830-1930. Secondly, the new estimates suggest revision of the historical national accounts published by Statistics Norway. Thirdly, this may lead to necessary revisions of both Norwegian industrial history and business cycle history.
    Keywords: Historical national accounting, national accounts, industrial development, Norwegian economic history
    JEL: L6 L7 L8 L9 N3 N13 N14 O11 O14 O16
    Date: 2015–12–17
  9. By: Alicia H. Munnell; Jean-Pierre Aubry; Caroline V. Crawford
    Abstract: Pension coverage in the private sector has shifted from defined benefit plans, where professionals make investment decisions, to 401(k) plans, where partici­pants are responsible for their own investment strat­egy. The supposition is that individuals are not very good at investing their own money and face high fees. The question is whether this supposition is borne out by the facts. That is, are returns on defined contribu­tion plans markedly lower than those on traditional defined benefit plans? This brief first discusses alternative ways to mea­sure the rate of return. The second section reports, under a variety of definitions, returns on defined benefit and defined contribution plans for 1990-2012 from the Department of Labor’s Form 5500. The third section explores the asset allocation of defined benefit and defined contribution plans and its poten­tial impact on returns. The fourth section presents regression results of the relationship between returns and plan type (defined benefit or defined contribu­tion), controlling for plan size and asset allocation. The fifth section discusses the extent to which fees may explain the lower return in defined contribution plans. The final section reports on Individual Retire­ment Accounts (IRAs) – the assets in these accounts now exceed holdings in either defined benefit or de­fined contribution plans, largely due to rollovers from employer-sponsored plans. The bottom line is that, during 1990-2012, defined benefit plans outperformed defined contribution plans by 0.7 percent. Since this differential remains even after controlling for size and asset allocation, the likely explanation is higher fees in defined contribu­tion accounts. The available data suggest that IRAs produce even lower returns than defined contribution plans, which implies trouble ahead given the massive amount of money that is being rolled over into IRAs.
    Date: 2015–12
  10. By: Wang, Weimin; Adams, Patrick
    Abstract: This paper presents a growth accounting framework in which subsoil mineral and energy resources are recognized as natural capital input into the production process. It is the first study of its kind in Canada. Firstly, the income attributable to subsoil resources, or resource rent, is estimated as a surplus value after all extraction costs and normal returns on produced capital have been accounted for. The value of a resource reserve is then estimated as the present value of the future resource rents generated from the efficient extraction of the reserve. Lastly, with extraction as the observed service flows of natural capital, multifactor productivity (MFP) growth and the other sources of economic growth can be reassessed by updating the income shares of all inputs, and then, by estimating the contribution to growth coming from changes in the value of natural capital input. This framework is then applied to the Canadian oil and gas extraction sector.
    Keywords: Crude oil and natural gas, Economic accounts, Energy, Productivity accounts
    Date: 2015–12–14

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