nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒05‒28
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  2. Non-performing loans: regulatory and accounting treatments of assets By Bholat, David; Lastra, Rosa; Markose, Sheri; Miglionico, Andrea; Sen, Kallol
  3. Accounting in central banks By Bholat, David; Darbyshire, Robin
  4. "Indirect Taxes in the Cross-border Shopping Model: A Monopolistic Competition Approach" By Hiroshi Aiura; Hikaru Ogawa
  5. Do Foreign Directors on Audit Committees Enhance Financial Reporting Quality? By Maryam Firoozi; Michel Magnan; Steve Fortin; Shane Nicholls
  6. Cross-Country Econometric Study on the Impact of Fiscal Incentives on Foreign Direct Investment By Revilla, Ma. Laarni D.
  7. Measuring Tax Administration Effectiveness and its Impact on Tax Revenue By DAS-GUPTA Arindam; B. ESTRADA Gemma; PARK Donghyun
  8. Large Depreciations: Recent Experience in Historical Perspective By José De Gregorio
  9. Mali; Technical Assistance Report-Tax Policy-Diagnostic Assessment By International Monetary Fund. Fiscal Affairs Dept.
  10. Highlights of Enhanced Japan's Flow of Funds Accounts Based on 2008SNA By Financial Statistics Group, Economic Statistics Division, Research and Statistics Department

  1. By: Kuziyev Islom Nematovich
    Abstract: This paper analyzes the characteristics of the audit in Uzbekistan. It examines the development of the audit report on the basis of international experience. Based on this study, the author proposed recommendations for improving audit report based on national and international auditing standards. Trends described in this article suggest that audit in Uzbekistan is gradually developing. Key words: international and national auditing standards, international financial reporting standards, report of the auditor, audit conclusions, a letter to the leadership, the financial information
    Date: 2016–03
  2. By: Bholat, David (Bank of England); Lastra, Rosa (Queen Mary University); Markose, Sheri (University of Essex); Miglionico, Andrea (University of Reading); Sen, Kallol (Bank of England)
    Abstract: Asset quality is an essential part of sound banking. However, asset quality is difficult for banking regulators and investors to assess in the absence of a common, cross-border scheme to classify assets. Currently no standard is applied universally to classify loans, the most sizable asset on many banks’ balance sheets. As a corollary, no common definition of non-performing loans (NPLs) exists. This paper documents divergences in the definition of NPLs across countries, accounting regimes, firms and data sources. The paper’s originality is in attending to the legal, accounting, statistical, economic and strategic aspects of loan loss provisioning (LLP) and NPLs, topics that are multidisciplinary by nature but have not been dealt with in the literature in an integrated fashion before. Since the 2007 Great Financial Crisis (GFC), accounting bodies and prudential regulators are increasingly focused on early recognition of credit losses and enhanced disclosure. A common approach to NPL recognition might complement these initiatives.
    Keywords: Non-performing loans; impairment; loan loss provisions; bank capital; data standards; credit risk.
    JEL: G01 G21 M41
    Date: 2016–04–22
  3. By: Bholat, David (Bank of England); Darbyshire, Robin
    Abstract: This paper examines the important but not often discussed issue of accounting in central banks. It highlights the distinguishing factors that make the financial statements of central banks unique relative to those produced by other bodies. We begin by explaining why central banks produce financial statements. We then discuss a variety of specific topics in central bank accounting. In terms of balance sheet items, we discuss banknotes, shareholders’ equity, gold, foreign exchange and financial instruments. Our discussion of the income statement then centres on profit recognition and distribution.
    Keywords: Central bank accounting; central bank balance sheet; seigniorage; central bank capital;
    JEL: E58 G20 H83 M40 M41 M48
    Date: 2016–05–20
  4. By: Hiroshi Aiura (Faculty of Economics, Oita University); Hikaru Ogawa (Faculty of Economics, The University of Tokyo)
    Abstract: Within the framework of cross-border shopping with monopolistic competition, we examine the relative merits of an ad valorem (ADV) tax and a unit (speci c) tax as indirect tax methods. Our study focuses on how the opening of borders and the entry of rms affect the equilibrium under each tax method. Our ndings reveal that the ADV tax method is superior to the unit tax method in terms of tax revenue and welfare. In addition, while the entry of rms and opening of borders reduce the dominance of tax revenue under the ADV tax method, they increase the method's merits from a welfare perspective.
  5. By: Maryam Firoozi; Michel Magnan; Steve Fortin; Shane Nicholls
    Abstract: With many firms expanding the global scope of their operations, the appointment of foreign directors certainly appears to be a positive governance development as it enhances board diversity in terms of expertise, experiences and backgrounds. However, a potential drawback is that foreign directors also are far removed from the information networks emanating from a firm’s headquarters and main operations. In this study, we investigate how foreign directors on the audit committee perform when it comes to monitoring the decisions made by managers regarding financial reporting. We rely on the unique context provided by Canada in which companies have access to a large pool of U.S. directors, a country with which it shares many similarities and is geographically close. Results show that 45% of sample firms have at least one foreign director on the audit committee, with 78% of these firms nominating directors residing in the U.S. Firms with foreign directors on their audit committee have lower financial reporting quality, both in terms of absolute abnormal accruals and restatement. In this regard, U.S. directors play a major role as the presence of non-U.S. foreign directors does not seem to relate to financial reporting quality. Our results hold after controlling for endogeneity and alternate explanations. This finding is in contrast to studies that find that foreign directors from countries with similarities will do a better job on boards in comparison to other foreign directors. La globalisation de l’activité commerciale et financière des entreprises s’accompagne depuis quelques années de la nomination de membres de conseil d’administration provenant de l’étranger. Ces nominations ajoutent à la diversité des conseils d’administration et permettent également aux entreprises d’accéder à un plus grand bassin de compétences. Toutefois, ces administrateurs étrangers sont également loin des réseaux d’information émanant du siège social ou du lieu où l’entreprise exerce la majeure partie de ses activités. Cette étude vise à évaluer l’impact de la nomination d’administrateurs étrangers sur la capacité d’un comité d’audit du conseil d’administration à surveiller les dirigeants d’entreprises, notamment en matière de divulgation financière. Notre analyse focalise sur les entreprises canadiennes car elles ont accès à un vaste bassin d’administrateurs étrangers provenant d’un contexte institutionnel, culturel et légal fort comparable, à savoir les États-Unis. Nos résultats montrent que 45% des entreprises constituant notre échantillon ont au moins un administrateur étranger sur leur comité d’audit, avec 78% de ces entreprises nommant un administrateur américain. Dans l’ensemble, les entreprises avec un ou des administrateurs étrangers sur le comité d’audit affichent des résultats financiers de moins bonne qualité, qu’elle soit mesurée en termes d’accruals discrétionnaires ou de redressements des états financiers. Cet effet est essentiellement déterminé par la présence d’administrateurs américains. Nos résultats demeurent les mêmes une fois l’endogénéité contrôlée et après l’évaluation d’explications alternatives. Ces résultats montrent que la capacité de surveillance des administrateurs étrangers semble moindre que celle des administrateurs domestiques, ce qui reflète probablement leur distance vis-à-vis les réseaux formels et informels d’information accessibles par les administrateurs domestiques.
    Keywords: Audit Committee, Financial Reporting Quality, Foreign Directors, comité d’audit, qualité de la divulgation financière, administrateurs étrangers
    Date: 2016–04–28
  6. By: Revilla, Ma. Laarni D.
    Abstract: The increasing level of competition for foreign direct investment (FDI) in the 1990s triggered many countries to offer various fiscal incentives. Specifically, many Asian countries persistently keep their tax rates competitive. To empirically investigate the relationship between the two variables, this paper examines the impact of fiscal incentives on FDI using panel data from 1996 to 2012 for five ASEAN countries. The analysis utilized five-panel data regression models, of which two are fixed-effects models and the remaining three are random-effects models. The results show that tax rate is negatively related to FDI. Another finding reveals the importance of infrastructure in increasing FDI. However, there is no significant link between governance indicators and FDI. To prevent a "race-to-the-bottom" effect on tax rates, the study recommends closer coordination between ASEAN countries in determining the optimal size and scope of these tax rates and other investment incentives. Additionally, focus on other country-specific factors affecting FDI flows, such as infrastructure, income, and population, is encouraged.
    Keywords: Philippines, fiscal incentives, ASEAN, foreign direct investment (FDI), tax policy, tax competition
    Date: 2016
  7. By: DAS-GUPTA Arindam (Goa Institute of Management); B. ESTRADA Gemma (Asian Development Bank); PARK Donghyun (Asian Development Bank)
    Abstract: This paper proposes a method for constructing a tax administration measure of effectiveness or TAME, and describes its desirable properties. TAME was empirically constructed using data from external audits of value-added tax administrations of India’s state governments. TAME was used to quantitatively assess the impact of tax administration effectiveness on tax revenues. The impact was found to be both statistically significant and large. The causes of tax administration effectiveness in the poorly performing states were then identified. Finally, this paper suggests guidelines for constructing TAMEs for other jurisdictions and time periods.
    Keywords: effectiveness, India, tame, tax administration, tax revenues, value-added tax
    JEL: H21 H25
    Date: 2016–04
  8. By: José De Gregorio (Peterson Institute for International Economics)
    Abstract: Data for a large sample of countries dating back to the early 1970s reveal that the large depreciations against the dollar that are occurring in many countries are not unprecedented in magnitude or duration. The pass-through to inflation from exchange rate depreciation has been slightly more muted than in previous occasions, but it is not out of line with experience since the mid-1990s. The current account adjustment has been more limited than in the past, possibly suggesting that the period of weak currencies may be prolonged.
    Keywords: Current account adjustment, depreciation, exchange rate pass-through, inflation
    JEL: E31 F31 F32 F41
    Date: 2016–05
  9. By: International Monetary Fund. Fiscal Affairs Dept.
    Abstract: With a ratio of tax revenue to GDP of 15.4 percent in 2013, Mali should improve its tax system in order to finance its economic and social development and reach the WAEMU tax transition target of 17 percent. This increase is also a benchmark agreed by the authorities under the program supported by the IMF Extended Credit Facility. The diagnostic assessment discussed in this report looked at the country’s main taxes and levies; it is supplemented by a second report on the mining and petroleum sector. This assessment is also aimed at identifying the topics for the successive missions included in the TPA-TTF (Tax Policy and Administration Topical Trust Fund) technical assistance program.
    Keywords: Sub-Saharan Africa;Mali;tax, taxes, tax expenditures, levies, property tax
    Date: 2016–03–17
  10. By: Financial Statistics Group, Economic Statistics Division, Research and Statistics Department (Bank of Japan)
    Abstract: In light of an increased importance of statistics related to the nonbanking sector -- such as corporate pensions and investment trusts -- with the rapidly ageing of Japan's population and a trend shift "From Saving to Investment" promoted by the government and industries, the Bank of Japan has made substantial revisions to Japan fs Flow of Funds Accounts for the first time since 1999. Highlights of the revisions are: (1) regarding corporate pensions, defined benefit schemes and defined contribution schemes are recorded separately as independent sectors, and the discounted present value of future benefits based on the actuarial calculation of pensions is recorded as pension entitlements and (2) regarding investment trusts, distributions from the principal are recorded not as income but as outflows of funds from investment trusts. As a result, issues of the balance between assets and liabilities of pension funds and distribution amounts from the principal of investment trusts are brought to the fore, allowing to capture financial surplus and deficits of households and private nonfinancial corporations in a more accurate fashion. This makes it possible for Japan's Flow of Funds Accounts to produce a more accurate picture of financial activities than those furnished by other advanced countries.
    Date: 2016–05–25

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