nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒11‒11
four papers chosen by

  1. Tangible and Intangible Assets in the Growth Performance of the EU, Japan and the US By Amat Adarov; Robert Stehrer
  3. Embedded Supervision: How to Build Regulation into Blockchain Finance By Auer, Raphael
  4. Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment By Marcelo Bergolo; Rodrigo Ceni; Guillermo Cruces; Matias Giaccobasso; Ricardo Perez Truglia

  1. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper discusses new results using the EU KLEMS 2019 Release focussing on the role of ICT and intangibles assets employing a growth accounting framework and an econometric analysis. The EU KLEMS 2019 data covers most EU Member States, the US and Japan, forty detailed industries according to NACE Rev. 2 (ISIC Rev. 4) along with nine aggregated industries and spans over the period 1995-2017. In particular, intangible assets outside the boundaries of the national accounts are taken into account. The data are used to study total factor productivity, labour and capital productivity developments in a comparative cross-country and cross-industry dimension with an emphasis on the role of capital investments. Inter alia, the analysis studies the implications of various asset types and particularly the role of ICT and intangible capital, as well as changes in labour services and the composition thereof, as drivers of value added and labour productivity growth. Significant differences in the underlying growth contributions between the pre-crisis and post-crisis periods in growth performances are highlighted. Disclaimer A comparative analysis based on the EU KLEMS Release 2019 The paper is written as part of the project ‘Industry level growth and productivity data with special focus on intangible assets’ under the Service Contract No. ECFIN-116-2018/SI2.784491 financed by the European Commission, DG ECFIN. We would like to thank Dale Jorgenson and participants of the Asian KLEMS conference (14-15 October 2019, Bejing) for useful comments.
    Keywords: EU KLEMS, growth accounting, tangible and tangible assets, ICT and non-ICT capital, productivity and growth
    JEL: C82 D24 O47
    Date: 2019–10
  2. By: Ariela Caglio; Sébastien Laffitte; Donato Masciandaro; Gianmarco Ottaviano
    Abstract: We provide the first detailed quantitative assessment of the effects of the Financial Fair Play Regulation (FFPR) introduced by the Union of European Football Associations (UEFA) on the income statements and balance sheets of European football clubs. While other studies exist documenting the financial challenges of the European football industry, to the best of our knowledge none has yet analyzed the implications of the FFPR. Our analysis relies on two two sources of information, one we assembled using information from Amadeus (Bureau van Dijk) and the other collected by the UEFA for the specific purpose of implementing the FFPR. Drawing on Amadeus data and regression outputs provided by the UEFA, we consistently find that the introduction of the FFPR has been followed by a significant improvement in the clubs’ income statements, which is consistent with the new accounting rules having ‘real effects’ on the clubs’ management. However, this positive development has yet to be paralleled also in the club’s balance sheets (notably in terms of debt) and cash flow statements, which may call for the FFPR to be further extended in that direction.
    Keywords: Financial fair play, UEFA, European football clubs, Financial sustainability, Break even requirement (BER)
    JEL: L5 L8
    Date: 2019
  3. By: Auer, Raphael (Bank of International Settlements)
    Abstract: The spread of distributed ledger technology (DLT) in finance could help to improve the efficiency and quality of supervision. This paper makes the case for embedded supervision, i.e., a regulatory framework that provides for compliance in tokenized markets to be automatically monitored by reading the market’s ledger, thus reducing the need for firms to actively collect, verify and deliver data. After sketching out a design for such schemes, the paper explores the conditions under which distributed ledger data might be used to monitor compliance. To this end, a decentralized market is modelled that replaces today’s intermediary-based verification of legal data with blockchain-enabled data credibility based on economic consensus. The key results set out the conditions under which the market’s economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger’s data. The paper concludes with a discussion of the legislative and operational requirements that would promote low-cost supervision and a level playing field for small and large firms.
    Keywords: tokenisation; stablecoins; asset-based tokens; cryptoassets; cryptocurrencies; regtech; suptech; regulation; supervision; Basel III; proportionality; blockchain; distributed ledger technology; central bank digital currencies; proof-of-work; proof-of-stake; permissioned DLT; economic consensus; economic finality; fintech; compliance; auditing; accounting; privacy; digitalisation; finance; banking
    JEL: D20 D40 E42 E51 F31 G12 G18 G28 G32 G38 K22 L10 L50 M40
    Date: 2019–10–01
  4. By: Marcelo Bergolo (IECON-UDELAR); Rodrigo Ceni (IECON-UDELAR); Guillermo Cruces (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS), IIE-FCE, Universidad Nacional de La Plata and University of Nottingham); Matias Giaccobasso (University of California, Los Angeles); Ricardo Perez Truglia (University of California, Los Angeles)
    Abstract: The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.
    JEL: C93 H26 K34 K42 Z13
    Date: 2019–11

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