nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒04‒16
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Agricultural accounting systems supporting farm financial management – the case of Polish FADN By Joanna Pawłowska-Tyszko; Michał Soliwoda
  2. The economics of corporate and business tax reform By Dhammika Dharmapala
  3. Taxing away M&A: The effect of corporate capital gains taxes on acquisition activity By Feld, Lars P.; Ruf, Martin; Schreiber, Ulrich; Todtenhaupt, Maximilian; Voget, Johannes
  4. Do tax incentives for research increase firm innovation? An RD design for R&D By Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
  5. Taxation of Knowledge-Based Capital: Non-R&D Investments, Average Effective Tax Rates, Internal Vs. External KBC Development and Tax Limitations By Alessandro Modica; Thomas Neubig
  6. Organizational complexity and balance sheet management in global banks By Cetorelli, Nicola; Goldberg, Linda S.
  7. How accounting accuracy affects DSGE models By Kim, Minseong
  8. Impairments of Greek government bonds under IAS 39 and IFRS 9: A Case Study By Gebhardt, Günther
  9. A comparative analysis of developments in central bank balance sheet composition By Christiaan Pattipeilohy
  10. Structure Depreciation and the Production of Real Estate Services By Yoshida, Jiro

  1. By: Joanna Pawłowska-Tyszko (Institute of Agricultural and Food Economics – National Research Institute); Michał Soliwoda (Institute of Agricultural and Food Economics – National Research Institute)
    Abstract: There is a limited number of research papers referring to the question how accounting systems affect economic and financial results of farms. The aim of this paper was to assess how agricultural accounting systems may support farm financial management, based on a case of Polish Farm Accountancy Data Network (Polish FADN). We presented the evolution, the current state and challenges for development of agricultural accounting in Poland. Selected features of FADN, taking into account the legal and organizational aspects were presented. Particular attention was paid to some aspects of usefulness of Polish FADN from the perspective of farm financial management (a micro focus). This study used multiple methodologies (mainly,elements of case study), to gather evidence. The FADN system in Poland brings several direct and indirect benefits, both at micro (for farmers) and sectoral levels. Individual Farm Report may support financial planning, but inflow of some detailed data on costs/margins may be very useful. The necessary rationale for using FADN system for supporting financial management is the strong need for providing more detailed data within the accounting system.
    Keywords: agricultural accounting, financial management, farm, FADN, Polish agriculture
    JEL: M41 Q14 Q18
  2. By: Dhammika Dharmapala (Univrsity of Chicago)
    Abstract: The reform of corporate and business taxation is central to current tax policy debates in the United States. This paper provides a framework for analyzing reform proposals by describing the lessons from current economic research for business tax reform, addressing both international and domestic reforms within a unified perspective. The paper begins by identifying ten potential inefficiencies created by the current corporate tax regime. It then discusses three classes of reform proposals. The first involves a substantially lower corporate tax rate and a territorial regime. The second is a formula apportionment system. The third category includes a destination-based cash flow tax. The paper evaluates each of these proposals in the light of the framework introduced earlier. It concludes that the relatively modest reforms currently under discussion would address only a few of these margins. In contrast, more fundamental reforms would eliminate all or most of the inefficiencies of corporate taxation.
    Keywords: Corporate tax; Business taxation; International taxation; Tax reform; Territorial taxation; Formula apportionment; Cash flow tax
    JEL: H25 F23
    Date: 2016
  3. By: Feld, Lars P.; Ruf, Martin; Schreiber, Ulrich; Todtenhaupt, Maximilian; Voget, Johannes
    Abstract: Taxing capital gains is an important obstacle to the efficient allocation of resources because it imposes a transaction cost on the vendor which locks in appreciated assets by raising the vendor's reservation price in prospective transactions. For M&As, this effect has been intensively studied with regard to share-holder taxation, whereas empirical evidence on the effect of capital gains taxes paid by corporations is scarce. This paper analyzes how corporate level taxation of capital gains affects inter-corporate M&As. Studying several substantial tax reforms in a panel of 30 countries for the period of 2002-2013, we identify a significant lock-in effect. Results from estimating a Poisson pseudo-maximum-likelihood (PPML) model suggest that a one percentage point decrease in the corporate capital gains tax rate would raise both the number and the total deal value of acquisitions by about 1.1% per year. We use this result to estimate an efficiency loss resulting from corporate capital gains taxation of 3.06 bn USD per year in the United States.
    Keywords: corporate taxation,M&A,capital gains tax,lock-in effect
    JEL: H25 G34
    Date: 2016
  4. By: Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
    Abstract: We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be prepolicy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme.
    Date: 2016–03
  5. By: Alessandro Modica; Thomas Neubig
    Abstract: This paper extends the tax analysis of knowledge-based capital (KBC) in several dimensions. The paper analyses non-R&D KBC: computer software, architectural and engineering designs, and economic competencies which account for over 70% of total KBC. The paper analyses the tax treatment of internally-developed KBC which is used in production by the developer versus KBC sold to third-party producers. The current tax rules generally favour internally-developed KBC, which disadvantages many SMEs and start-up companies specializing in innovation. The analysis reports two average effective tax rates (ETRs) depending on investors’ considerations of their investment opportunities. When KBC is unique, earns excess returns due to market power, or involves financing-constraints, ETRs are high despite immediate expensing. The paper also analyses the effects of tax limitations, where many SMEs and start-up companies can’t benefit from tax credits and deductions until having sufficient tax liability. L'imposition du capital intellectuel : Investissements non liés à la R-D, taux moyens effectifs d'imposition, développement interne/externe du capital intellectuel et restrictions fiscales Ce document prolonge l’analyse fiscale du capital intellectuel dans différents domaines. Il analyse le capital intellectuel non lié à la R-D : les logiciels informatiques, la conception architecturale et technique, et les compétences économiques qui représentent plus de 70 % du capital intellectuel total. Ce document examine le traitement fiscal du capital intellectuel développé en interne, qui est employé en production par le développeur, par rapport au capital intellectuel vendu à des producteurs tiers. Les règles fiscales actuelles favorisent généralement le capital intellectuel développé en interne, ce qui pénalise de nombreuses PME et jeunes entreprises qui se spécialisent dans l’innovation. L’analyse met en évidence deux taux moyens effectifs d’imposition (TMEI) en fonction de l’évaluation par les investisseurs des opportunités d’investissement. Lorsque le capital intellectuel est unique, génère un rendement excessif en raison de l’existence d’un pouvoir de marché ou implique des contraintes de financement, les TMEI sont élevés malgré une passation immédiate en charges. Ce document analyse également les conséquences des restrictions fiscales, sous l’effet desquelles de nombreuses PME et jeunes entreprises ne peuvent pas bénéficier de crédits et d’allégements d’impôts tant que le montant de leur impôt n’atteint pas un niveau suffisant.
    Date: 2016–03–10
  6. By: Cetorelli, Nicola (Federal Reserve Bank of New York); Goldberg, Linda S. (Federal Reserve Bank of New York)
    Abstract: Banks have progressively evolved from being standalone institutions to being subsidiaries of increasingly complex financial conglomerates. We conjecture and provide evidence that the organizational complexity of the family of a bank is a fundamental driver of the business model of the bank itself, as reflected in the management of the bank’s own balance sheet. Using micro-data on global banks with branch operations in the United States, we show that branches of conglomerates in more complex families have a markedly lower lending sensitivity to funding shocks. The balance sheet management strategies of banks are very much determined by the structure of the organizations the banks belong to. The complexity of the conglomerate can change the scale of the lending channel for a large global bank by more than 30 percent.
    Keywords: global bank; liquidity; transmission; internal capital market; organization; complexity
    JEL: E44 F36 G32
    Date: 2016–03–01
  7. By: Kim, Minseong
    Abstract: This paper explores how accounting consistency affects DSGE models. As many DSGE models descended from real business cycle models, I explore a simple labor-only RBC model with an exogenous external sector introduced. The conclusion reached in this paper is that once an external sector is introduced, DSGE models may suffer from accounting inconsistency, unless disequilibrium or some non-orthodox theory of price level, real monetary supply or bonds is accepted.
    Keywords: accounting consistency, DSGE, external sector, fiscal deficit
    JEL: B41 E13 E62 F41
    Date: 2016–03–29
  8. By: Gebhardt, Günther
    Abstract: IFRS 9 introduces new impairment rules responding to the G20 critique that IAS 39 results in the delayed and insufficient recognition of credit losses. In a case study of a Greek government bond for the period 2009 to 2011 when Greece´s credit rating declined sharply, this study highlights the discretion that preparers have when estimating impairments. IFRS 9 relies more on management expectations and will lead to earlier impairments. However, these appear still delayed and low if compared to the fair value losses.
    Keywords: IFRS 9,credit losses,government bonds
    Date: 2015
  9. By: Christiaan Pattipeilohy
    Abstract: In this paper we analyse developments in the composition of central bank balance sheets for a large set of central banks in a unified framework. Since 2007, central banks in advanced economies have experienced pronounced changes in balance sheet composition as a consequence of unconventional monetary policy measures. In addition, we document a convergence in balance sheet composition from 2007 until 2009, as the initial crisis response was fairly homogeneous across advanced economies, mostly driven by financial stability concerns. However, since 2009 design of balance sheet policies has been more diverse, reflecting diverging policy challenges across regions. By contrast, balance sheets of central banks in emerging market economies have remained broadly unchanged in terms of composition in the period under review.
    Keywords: Central bank balance sheet; unconventional monetary policy; dissimilarity analysis
    JEL: E40 E42 E50 E58
    Date: 2016–04
  10. By: Yoshida, Jiro
    Abstract: This study simultaneously analyzes the real estate production function and economic depreciation of structures by using data from Japan and the U.S. The estimated share of structure value is used to infer returns to scale, the land-structure substitution, and the structure depreciation rate. Real estate exhibits approximately constant returns in Japan, but decreasing returns in the U.S. Land and structures are substitutes in both countries. The land value ratio is 10% in Centre County, PA, but 60%-70% in Japan, reflecting the scarcity of land. The property depreciation rate is larger for newer and denser properties located further away from the downtown area in a smaller city. The property depreciation rate is smaller than the structure depreciation rate due to the effect of land and a survivorship bias. The bias-corrected structure depreciation rates significantly vary by property type and country: approximately 7% for residential properties and 10% for commercial properties in Japan in contrast with 1% for residential structures in the U.S. The median life-span of structures is 30-35 years for residential and 20-30 years for commercial properties in Japan.
    Keywords: capital consumption, returns to scale, elasticity of substitution, housing, commercial real estate, hedonic analysis, survivorship bias, demolition, Japan, USA
    JEL: R32 D24 E23
    Date: 2016–03

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