nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒11‒27
six papers chosen by

  1. Types of financial statements, questions of their submission and comparative analysis according to the IFRS By Levan Sabauri; Nadezhda Kvatashidze
  2. The Role of Local Accounting Standard Setters in Institutional Complexity: 'Explosion' of Local Standards in Japan By Saori Matsubara; Takahiro Endo
  3. Spillover from the haven: Cross-border externalities of patent box regimes within multinational firms By Schwab, Thomas; Todtenhaupt, Maximilian
  4. Tax Exhaustion, Firm Investment, and Leasing: A Test of the Q Model of Investment By Michael P. O'Malley
  5. A decomposition algorithm for computing income taxes with pass-through entities and its application to the Chilean case By Javiera Barrera; Eduardo Moreno; Sebastian Varas
  6. Corporate disclosure: a review of its (direct and indirect) benefits and costs By Etienne Farvaque; Catherine Refait-Alexandre; Dhafer Saïdane

  1. By: Levan Sabauri (Ivane Javakhishvili Tbilisi State Univeristy); Nadezhda Kvatashidze (Ivane Javakhishvili Tbilisi State University)
    Abstract: In conditions of globalization there is increased significance of financial statements increased, the qualitative characteristics of information of which define its usefulness for user of information. Information is useful when it helps the information user to make economical decision. For making of economical decisions users need different statements, rules of preparation and submission of which are regulated by International Financial Reporting Standards (IFRS). These statements are of general purpose, individual. consolidated, combined, pro forma. International Accounting Standards Board (IASB) constantly works on improvement of submission of information from such statements, and as result there were made so many changes in the corresponding IFRS during the last years (2011-2016). These changes are expressed in explanation of doctrines, parameters of consolidation, methods of estimation of statements indexes, explanatory notes etc. For all this we need to think from the beginning about what purpose and contents has any kind of financial statement, how do they differ from each other, in which case which statement shall be submitted, which statement does the user need.
    Keywords: Purpose of financial statement; conception of enterprise, conception of owner; standards of small and average enterprises; financial statement of general purpose; individual financial statement; consolidated financial statement; combined financial statement; pro forma financial statement
    JEL: M41 M41
  2. By: Saori Matsubara (Tokai University, Department of Business Administration); Takahiro Endo (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: Purpose The paper intends to locate the role of local standard setters in institutional complexity, where multiple sources of pressure for change and continuity coexist. The existing research does not fully explore this since it tends to illustrate the way in which a particular interpretation concerning certain accounting standards prevails over time (Archel et al., 2011; Murphy and O'Connell, 2013; Pelger, 2015; Young, 2014). Design/methodology/approach It empirically examines and critiques the Japanese experience through the concepts of institutional complexity and translation that specify the relationship between the name and types of practice of accounting standards in the local context (Czarniawska and Sevón, 1996, 2005; Erlingsdóttir and Lindberg, 2005; Røvik, 2016; Sahlin and Wedlin, 2008). Data sources are texts produced (between 2001-2015) by the local accounting standard setter and relevant organisations that represent firms, the certified public accountants and regulatory agency, respectively. Findings The local accounting standard setter in Japan was exposed to competing pressures between change and maintenance, which was translated by the standard setter in Japan. Consequently, the translation led to an 'explosion' of local accounting standards ('pure' IFRS, Japanese GAAP, modified IFRS and US GAAP). Originality/value This article is the first attempt to systematically examine the role of a local standard setter under institutional complexity. It illustrates how institutional complexity is turned into divergent outcomes against the assumption of previous research that indicates multiple interpretations of particular accounting standards finally merging into a specific one.
    Keywords: IFRS, Local standard setter, Translation, Institutional perspective
    Date: 2016–11
  3. By: Schwab, Thomas; Todtenhaupt, Maximilian
    Abstract: This paper analyzes externalities of patent box regimes in Europe. Tax reductions in foreign affiliates of a firm that also provide a profit shifting opportunity reduce the user cost of capital and thereby increase domestic investment. We test this mechanism for the case of research activity. By combining information on patents, firm ownership data and specific characteristics of patent box regimes, we show that patent box regimes without nexus requirements for tax-efficient reallocation of patent profits induce positive spillovers within multinational groups. The implementation of a patent box in a country one of the foreign affiliates of a firm resides, increases domestic research activity by about 74 percent or 2 percent per implied tax rate differential. Furthermore, our findings suggest that patent boxes generate negative spillovers on average patent quality. This has important implications for international tax policy and the evaluation of patent box regimes.
    Keywords: patent box,spillover,corporate taxation,innovation
    JEL: F23 H25 O31
    Date: 2016
  4. By: Michael P. O'Malley
    Abstract: Standard models of investment usually incorporate various tax factors but often overlook "tax exhaustion," the case when a firm has negative taxable income and cannot claim immediately its tax deductions or credits. However, tax exhausted firms face a higher cost of capital, and evidence shows that tax exhaustion is not uncommon. This paper incorporates tax exhaustion into a "Q" model of investment to see whether its performance is improved. In addition, leased investment is fully incorporated into the model, in part because tax exhaustion creates incentives to lease investment products and because investment models explain decisions to use equipment, not the decision about how to finance them. The results show that accounting for leasing improves significantly the performance of the Q model, whereas accounting for tax exhaustion does not affect the results meaningfully.
    Keywords: Investment ; corporate taxation ; leasing
  5. By: Javiera Barrera; Eduardo Moreno; Sebastian Varas
    Abstract: Income tax systems with pass-through entities transfer a firm's incomes to the shareholders, which are taxed individually. In 2014, a Chilean tax reform introduced this type of entity and changed to an accrual basis that distributes incomes (but not losses) to shareholders. A crucial step for the Chilean taxation authority is to compute the final income of each individual, given the complex network of corporations and companies, usually including cycles between them. In this paper, we show the mathematical conceptualization and the solution to the problem, proving that there is only one way to distribute incomes to taxpayers. Using the theory of absorbing Markov chains, we define a mathematical model for computing the taxable incomes of each taxpayer, and we propose a decomposition algorithm for this problem. This allows us to compute the solution accurately and with the efficient use of computational resources. Finally, we present some characteristics of the Chilean taxpayers' network and computational results of the algorithm using this network.
    Date: 2016–09
  6. By: Etienne Farvaque (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - Fédération Universitaire et Polytechnique de Lille - Université de Lille, Sciences Humaines et Sociales - CNRS - Centre National de la Recherche Scientifique); Catherine Refait-Alexandre (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté, UBFC - Université Bourgogne Franche-Comté); Dhafer Saïdane (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - Fédération Universitaire et Polytechnique de Lille - Université de Lille, Sciences Humaines et Sociales - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper reviews the literature on corporate disclosure. Policymakers often support corporate disclosure but more contrasted views have emerged in the academic literature, showing that even if disclosure can actually benefits to shareholders, it is costly and it may trigger pernicious effects. Disclosing information is expensive (communication and audit costs, competitors access strategic information, and induced managers' suboptimal behavior). It also generates informational costs, as firms can disclose false, manipulated, too complex or too extensive information. And disclosure can reduce actors' incentives to look for information about the firm, and therefore can lead to an (potentially destabilizing) illusion of knowledge.
    Abstract: Cet article présente la littérature relative à la transparence des entreprises. La transparence apparaît souvent comme souhaitable voire nécessaire dans les discours des responsables politiques. La littérature académique est néanmoins plus nuancée : elle montre que même si une divulgation d'informations accrue de la part des entreprises a souvent des effets bénéfiques, notamment pour les actionnaires, elle engendre néanmoins des coûts et peut avoir des effets pervers. Divulguer de l'information est coûteux (coûts d'audit et de diffusion, comportement sous-optimal des dirigeants). La transparence induit aussi des coûts informationnels : les entreprises peuvent divulguer des informations fausses, manipulées, trop complexes ou trop nombreuses. Et la transparence peut réduire les incitations des acteurs en présence à chercher de l'information relative à l'entreprise, pouvant ainsi créer une illusion de connaissance potentiellement déstabilisatrice.
    Keywords: Disclosure,Governance,stabilité financière,communication,gouvernance,Financial Stability Classification , Transparence
    Date: 2016–11–09

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