nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒08‒21
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Are level 3 fair values reflected in firm value? Evidence from European banks By Katja Kisseleva; Daniela Lorenz
  2. Does capital tax uncertainty delay irreversible risky investment? By Niemann, Rainer; Sureth, Caren
  3. VAT non-compliance in Poland under scrutiny (Problem nieœci¹galnoœci VAT w Polsce pod lup¹) By Grzegorz Poniatowski; dr. Jaros³aw Neneman; Tomasz Michalik
  4. Intra-good trade in Germany: A first look at the evidence By Wagner, Joachim
  5. A Closer Look at EU Current Accounts By Mariarosaria Comunale

  1. By: Katja Kisseleva (ESMT European School of Management and Technology); Daniela Lorenz (Free University, Berlin)
    Abstract: This paper investigates whether, and if so, to what extent, Level 3 fair values disclosed by European banks provide useful information to investors and are reflected in firm value changes. Using a unique sample of 416 hand-collected firm-year observations from European banks reporting under IFRS, in contrast to previous research conducted in the US, we find no overall evidence that changes in Level 3 fair values are associated with changes in firm value. However, the value relevance of Level 3 fair values depends on the category assigned to financial instruments. Level 3 fair values that are held for trading are reflected in firm value. Further analyses suggest that this effect is driven predominantly by banks that operate in market-based economies and hire audit firms with deep industry expertise.
    Keywords: fair value accounting, valuation, mark-to-model, value relevance, fair value hierarchy
    JEL: M41 N20
    Date: 2016–08–11
  2. By: Niemann, Rainer; Sureth, Caren
    Abstract: Tax uncertainty is often claimed to be harmful for investments. Capital taxes, such as property and wealth taxes, are particularly exposed to tax uncertainty. Capital tax uncertainty emerges from expected tax reforms, the unclear outcome of future tax audits, and simplified estimates of capital tax bases in investment models. Uncertain returns on investment as well as stochastic taxation contribute to overall uncertainty and may significantly affect investment decisions. Hitherto, it is unknown how capital tax uncertainty affects investment timing. However, it is well known that both uncertainty and capital tax may be harmful for investment and decelerate investment activities. We are the first to study the investment timing effects of stochastic capital taxes in a real options setting with risky investment opportunities. Our results indicate that even risk neutral investors are sensitive with respect to capital tax risk and may react in a surprising manner to a newly introduced stochastic capital tax. As an apparently paradoxical investment effect, we find that increased capital tax uncertainty can accelerate risky investment if such uncertainty is sufficiently low compared to cash .ow uncertainty. In contrast, high capital tax risk delays high-risk innovative investment projects. To reduce unintended consequences of uncertain tax policy, tax legislators and tax authorities should avoid high levels of capital tax uncertainty. Broadening the capital tax base or increasing the capital tax rate induces ambiguous timing effects. Furthermore, high-growth investments are likely to be postponed if they experience a capital tax cut. Since investment reactions upon tax reforms are well-known to affect income and wealth distribution, reliable estimations of the impact of taxes on economic decisions are necessary.
    Keywords: property tax,capital tax,investment decisions,real options,timing flexibility,uncertainty
    JEL: H25 H21
    Date: 2016
  3. By: Grzegorz Poniatowski; dr. Jaros³aw Neneman; Tomasz Michalik
    Abstract: Since 2009, despite constant growth in the tax base and only slight variations in effective rates, the trend in VAT revenue in Poland has been reversed, and inflows have become less stable. The ongoing decline in VAT collection and the increase in the uncertainty related to the main component of budget revenues is a very important problem, which in the light of growing budget spending may threaten the stability of public finances. Three experts: Grzegorz Poniatowski, dr. Jaros³aw Neneman and Tomasz Michalik examine the structure and the causes of the VAT gap as well as the legal context and possible methods of improving VAT compliance at national and European level.
    Keywords: Economics and Finance, Macroeconomics and Monetary Economics
    JEL: E E02 E5 E6 E42
    Date: 2016–06
  4. By: Wagner, Joachim
    Abstract: This paper contributes to the literature by using newly released comprehensive transaction level data on all exports and imports to document facts about the amount of intra-good trade – the simultaneous export and import of identical goods by one firm - in Germany. Combined data for trade transactions and for characteristics of a representative large sample of trading firms are then used to report differences between firms that export and import different goods only (inter-good traders) and firms that engage in the simultaneous export and import of identical goods (intra-good traders). We find that the share of intra-good trade in total trade was some 17 percent in Germany in 2012. Intra-good trade matters. This share differs widely between broadly defined groups of goods and between industries. Controlling for detailed industry affiliation intra-good traders differ significantly from inter-good traders – they are larger, more human capital intensive, more productive, have a higher R&D intensity, and are more profitable. The data, however, are not rich enough to reveal the direction of causality between intra-good trade and firm performance and to investigate empirically the reasons why some firms engage in intra-good trade.
    Keywords: Intra-product trade, two-way trade, imports, exports, Germany
    JEL: F14
    Date: 2016–08–05
  5. By: Mariarosaria Comunale (Economics Department, Bank of Lithuania)
    Abstract: In this paper, we look at the determinants of current accounts in twenty-seven EU countries over the period 1994-2014. The twenty-seven countries of interest are divided into three sub-groups, namely: core, periphery and CEE new member states. We also assess the current accounts based on computed equilibrium values, and we provide a measure of misalignment for the medium run. As determinants we include capital flows as well as demographic, fiscal and relative development factors. The initial Net Foreign Asset position and oil balance seem to matter more in the core countries than in the periphery and CEE new member states. In contrast, the periphery and CEE new member states seem to be more strongly affected by capital flows. Fiscal balance negatively affects only the periphery, while an increase in government spending is positive for the current account for CEE new member states. In the past twenty years these misalignments have shown a cyclical behaviour in most EU countries, and the magnitude of the cycles themselves are highly heterogeneous across groups. Lastly, we compute an adjusted current account equilibrium, which tries to correct the equilibrium value by the role of expectations (proxied by IMF projections). This factor has more of an impact in the UK than in the euro-area countries.
    Keywords: Current account misalignments; foreign capital ?ows; European Union.
    JEL: F32 F31 C33
    Date: 2016–08–11

This nep-acc issue is ©2016 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.