nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2020‒12‒21
ten papers chosen by

  1. Does Recognition versus Disclosure of Pension Liabilities Affect Credit Ratings? Evidence from Japan By Masaki KUSANO
  2. Costa Rica; Technical Assistance Report—The National Accounts Statistics Capacity Development Mission By International Monetary Fund
  3. Chile; Technical Assistance Report—Assessment of Tax Expenditures and Corrective Taxes By International Monetary Fund
  4. Republic of Korea; Financial Sector Assessment Program-Technical Note-Non-Financial Balance Sheet Vulnerabilities and Risks to Financial Stability By International Monetary Fund
  5. Ukraine; Technical Assistance Report—A Follow-Up on Distributed Profit Tax, BEPS Implementation, Voluntary Disclosure Program, and Indirect Methods for Determining Taxable Income By International Monetary Fund
  6. The reconstruction of back data for Italy’s balance of payments and international investment position (1970-1999) By Enrico Tosti
  7. Born in hard times: startups selection and intangible capital during the financial crisis By Guzman Gonzales-Torres; Francesco Manaresi; Filippo Scoccianti
  8. Origins of Mutual Fund Skill: Market versus Accounting Based Asset Pricing Anomalies By Charlotte Christiansen; Ran Xing; Yue Xu
  9. Belize; Technical Assistance Report—Cybersecurity, Regulation, Supervision, and Resilience By International Monetary Fund
  10. Role of Supreme Audit Institutions in Governments' Response to COVID-19 By World Bank

  1. By: Masaki KUSANO
    Abstract: Whether credit market participants process disclosure and recognition of pension information differently has not been fully explored. To fill this gap, this study investigates whether the change in a pension accounting standard related to the recognition rule influences firms’ credit risk in Japan. Statement No. 26, Accounting Standard for Retirement Benefits, stipulates that firms recognize previously disclosed pension information on the balance sheet. Employing the implementation of Statement No. 26, I explore how differences between disclosed and recognized pension liabilities affect credit ratings. I find that off-balance sheet pension liabilities are associated with credit ratings prior to Statement No. 26. I also find similar relations between disclosure versus recognition of pension liabilities and credit ratings. Particularly, when pension information is highly reliable, off-balance sheet pension liabilities provide risk-relevant information, and the risk relevance of disclosed and recognized pension liabilities is statistically similar. My overall results reveal that, to the extent that accounting information is reliable, credit rating agencies fully incorporate off-balance sheet pension information into credit ratings, suggesting that mandating pension recognition does not affect firms’ credit ratings.
    Keywords: Recognition versus Disclosure, Pension Accounting, Credit Ratings, Reliability of Accounting Information
    JEL: M41 M48
    Date: 2020–12
  2. By: International Monetary Fund
    Abstract: A technical assistance (TA) mission, conducted by CAPTAC-DR, took place during August 27 to September 7, in San Jose, Costa Rica, to assist the Central Bank of Costa Rica (CBCR) in compiling the non-financial and financial balance sheets. This TA mission was requested in the context of the rebasing project of the national accounts series to 2017, as follow-up of a previous mission conducted in March 2018. This mission covered two purposes: 1) provide guidance to the CBCR in developing statistical methods to estimate the capital stock for the non-financial private sector (NFPS), and 2) provide TA in compiling balance sheets, as part of the annual accounts by institutional sector (AAIS) of Costa Rica.
    Keywords: Financial statements;Stocks;National accounts;Fiscal accounting and reporting;Securities;ISCR,CR,balance sheet,asset,asset balance sheet project
    Date: 2020–10–07
  3. By: International Monetary Fund
    Abstract: In response to a request from Mr. Ignacio Briones Rojas, Minister of Finance of Chile, a remote mission was conducted by a joint team of staff from the International Monetary Fund (IMF) and the secretariat of the Organisation for Economic Co-operation and Development (OECD) during April – October 2020. The mission’s main purpose was to assist the Minister of Finance with technical support to review Chile’s tax expenditure methodology and its corrective excise taxes. The present report reflects the findings of the mission. This report was written jointly by the IMF and the OECD, with the IMF team leading the work assessing tax expenditures in the corporate income tax (CIT) and the analysis of excises, and the OECD team leading the work assessing tax expenditures in the personal income tax (PIT) and value added tax (VAT). A presentation of the main findings was given to the Minister of Finance on October 6, 2020. The report incorporates comments provided by the Ministry and the Chilean Revenue Administration.
    Keywords: Income;Personal income;Corporate income tax;Personal income tax;Value-added tax;ISCR,CR,excise tax,capital gain,taxable income,carbon tax,tax treatment,Te report
    Date: 2020–11–19
  4. By: International Monetary Fund
    Abstract: Non-Financial Corporate Sector. Non-financial corporate leverage as share of GDP in Korea remains higher than peer countries but has remained stable since 2013 at around 100 percent of GDP. The stock of non-corporate debt has become slightly more resilient due to the deleveraging of non-conglomerate affiliated firms. Average firm performance has remained resilient for conglomerate-affiliated corporates but weakened for all other firms. As a result, despite the low interest rate environment, around one-quarter of total corporate debt (around 28 percent of GDP) is registered ‘at-risk’. Banks balance sheets are at risk as over half of non-financial corporate debt-at-risk resides with SMEs; Stress tests show that (i) Korean firms which are more indebted, less profitable, smaller and have lower turnover are more likely to experience difficulties servicing their debt; (ii) corporate balance sheets are vulnerable to a sudden hike in interest rates, which combined with a profit shock, could double the amount of debt-at-risk held by non-SME firms and; (iii) exchange rate shocks appear manageable given low FX debt and natural FX hedges. Under a downside macro-financial stress test scenario, non-SME credit losses would total a touch over 2 percent of GDP. Bank stress tests suggest that the maximum cumulative bank losses from distressed SME loans in a stress scenario would total around 2 percent of GDP. Together, these losses would be broadly manageable for the financial system to absorb.
    Keywords: Financial statements;Personal income;Debt service;Housing prices;Stress testing;ISCR,CR,market mis-valuation,return on assets,capital structure
    Date: 2020–09–18
  5. By: International Monetary Fund
    Abstract: Tax policy in Ukraine is engaged in two fronts at once. On one front, very significant work has been done over the years on the gradual improvement and updating of the tax system; on the other, it questions essential tenets of the existing system, exploring fundamental changes to it. While serious efforts have been devoted, for example, to the modernization of the international aspects of the income tax, upgrading the regime to OECD standards, there is a strong push from some quarters of the policy debate to do away with the Corporate Profit Tax (CPT) altogether. The central idea is to replace it with a Distributed Profit Tax (DPT), generally referred to in Ukraine as the Exit Capital Tax (ECT). In essence, this system would not tax profits as they accrue to the corporation, deferring the tax to when the corporation distributes dividends to the shareholder.
    Date: 2020–11–18
  6. By: Enrico Tosti (Bank of Italy)
    Abstract: The changeover to the sixth Balance of Payments Manual (BPM6) has meant a significant revision of the international standards for compiling external statistics (flows and stocks). In accordance with international agreements, the reconstruction was carried out starting from 1995 for the balance of payments and from the end of 1998 for the international investment position. This statistical work extends the revision back to 1970 for both of them, using ad hoc estimates when necessary. By and large, the reconstruction was based on the criterion of keeping overall balances unchanged, i.e. of not significantly altering past history. Although compliance with BPM6 standards has not always been strictly possible, the possibility of having longer time series nonetheless widens the scope for the long-term analysis of real and financial phenomena concerning Italy’s external economic relations.
    Keywords: balance of payments, international investment position, time series reconstruction
    JEL: C82 F00 N14 Y1
    Date: 2020–11
  7. By: Guzman Gonzales-Torres (Bank of Italy); Francesco Manaresi (Bank of Italy); Filippo Scoccianti (Bank of Italy)
    Abstract: We show that the credit crunch of 2007-2013 favoured the adoption by startups of more efficient, intangible-intensive technologies. Using data for the universe of Italian corporations, we document that the cohorts of firms born during the crisis significantly increased their share of intangible capital relative to both incumbents and comparable young firms born before the crisis. Moreover, the entry rates of intangible-intensive startups decreased by less than those of other firms. We estimate that this selection is directly linked to the tightening of credit conditions. We use a firm dynamics model to unveil the mechanism behind these patterns. Intangible goods make firms more efficient and profitable, reducing their demand of total capital and, crucially, their leverage at entry: this increases their resiliency to a financial shock. In the aggregate, a credit tightening changes the composition of new cohorts in favor of intangible-intensive producers, resulting in a persistent increase in intangible capital accumulation.
    Keywords: firm dynamics, intangibles, startup, financial crisis
    JEL: E22 E23 G32
    Date: 2020–11
  8. By: Charlotte Christiansen (Aarhus University and CREATES and DFI and Lund University); Ran Xing (Aarhus University and DFI); Yue Xu (Aarhus University and CREATES)
    Abstract: We investigate the information source of active U.S. equity mutual funds’ value added using 234 public asset pricing anomalies. On average, mutual funds add value through their positive exposures to anomalies based on market information (e.g., momentum and liquidity risk) and lose value through their negative exposures to anomalies based on accounting information of firm fundamentals (e.g., investment and profitability), corroborating that both the semi-strong and weak forms of the efficient market hypothesis do not hold. We also find weak evidence that mutual funds profit from their private information, supporting the rejection of the strong form efficient market hypothesis.
    Keywords: Mutual funds, Anomalies, Value added, Public information, Investment decisions
    JEL: G11 G14 G23
    Date: 2020–12–10
  9. By: International Monetary Fund
    Abstract: Cybersecurity risk is embedded in the CBB’s supervisory framework, but additional enhancements are needed to formalize guidance and develop more intensive supervisory practices. Supervisory expectations on cybersecurity are presented in an informal guidance note, which should be formalized into regulation to ensure enforceability; and an IT/cybersecurity supervisory manual should be developed to promote effective and consistent practices. With its principle-based guidance note, the CBB highlights its priorities in strengthening the cybersecurity posture of Belizean financial institutions. The principles are an appropriate interpretation of international best practices on incident prevention, detection, response, and recovery measures, adapted to the cyber maturity of the Belizean financial institutions, and can be used as a foundation for the formalized guidelines. The manual could emphasize the review of cybersecurity strategies, policies, and responsibility specifications and should address obtaining assurance on the effectiveness of the financial institutions’ processes for cyber risk identification, assessment, and mitigation.
    Keywords: Cyber risk;Operational risk;Internal audit;Securities;Financial services;ISCR,CR,risk management,self-assessment guidance,cybersecurity governance,cybersecurity process,efficiency gain
    Date: 2020–09–25
  10. By: World Bank
    Keywords: Governance - Governance and the Financial Sector Public Sector Development - Public Financial Management
    Date: 2020–06

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.