nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒01‒11
twenty papers chosen by

  1. Ukraine; Technical Assistance Report-Distributed Profit Tax; Voluntary Disclosure of Assets; and BEPs Implementation By International Monetary Fund
  2. Islamic Republic of Afghanistan; Technical Assistance Report-Report on Government Finance Statistics Technical Assistance Mission (October 18-31, 2018) By International Monetary Fund
  3. France; Financial Sector Assessment Program-Technical Note-Balance Sheet Risks and Financial Stability By International Monetary Fund
  4. Philippines; Technical Assistance Report-Monetary and Financial Statistics Mission By International Monetary Fund
  5. Capturing banking flows: The predominant role of OFCs in the international financial architecture By Étienne Kintzler; Mathias Lé; Kevin Parra Ramirez
  6. Correlation in State and Local Tax Changes By Scott R. Baker; Pawel Janas; Lorenz Kueng
  7. Russian Federation; Fiscal Transparency Evaluation Update By International Monetary Fund
  8. Ukraine; Technical Assistance Report-Fiscal Decentralization and Legal Framework for Fiscal Risk Management and Medium-term Budgeting By International Monetary Fund
  9. Exorcising the “Ghosts” from the Government Payroll in Developing Countries in the Wake of the Covid-19 Pandemic: Ghana’s Empirical Example By Quarm, Richmond Sam; Sam-Quarm, Rosemond; Sam-Quarms, Richmond; Institute of Research, Asian
  10. Discussion Note on Strengthening the Parliament and Supreme Audit Institution Relationship to Enhance External Audit Performance in the Western Balkans By World Bank
  11. How to Set Up A Cash Buffer; A Practical Guide to Developing and Implementing a Cash Buffer Policy By Yasemin Hurcan; Emre Balibek; Fatoş Koç
  12. Republic of Madagascar; Technical Assistance Report—Government Finance Statistics Mission By International Monetary Fund
  13. An authenticated and secure accounting system for international emissions trading By Chenxing Li; Yang Yu; Andrew Chi-Chih Yao; Da Zhang; Xiliang Zhang
  14. Iceland; Selected Issues By International Monetary Fund
  15. Analysis and Control of Bankruptcy and Reorganization Processes: Case Studies Using Accounting Data By Abuselidze, George
  16. Volatility of national account data for Iceland and other OECD countries By à sgeir Daníelsson
  17. Vietnam; Technical Assistance Report-Report on the National Accounts Mission By International Monetary Fund
  18. Real exchange rate misalignment in developing countries: the role of exchange rate flexibility and capital account openness By Wishnu Mahraddika
  19. Thailand; Financial Sector Assessment Program-Detailed Assessment of Observance-Insurance Core Principles By International Monetary Fund
  20. Chad; Fifth Review under the Extended Credit Facility Arrangement and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chad By International Monetary Fund

  1. By: International Monetary Fund
    Abstract: This Technical Assistance report focuses on Ukraine’s distributed profit tax, voluntary disclosure of assets, and Base Erosion and Profit Shifting Work Program implementation. The recommendations largely favor simplifying rules, improving the definition of basic concepts, eliminating potential loopholes, and adhering more closely to international standards in some cases. Thus, for the sake of simplification, the report recommends that Controlled Foreign Corporation rules should apply to the ‘first onshore’ person rather than having to trace them back to the ultimate beneficial owner in Ukraine. Also, it recommends that the proposed interest deduction limitation should eliminate the carry-forward currently permitted, limit deductions to net interest expense and exempt the financial sector from this limitation. Some key definitions can be improved too. The report suggests that if there is an urgent need to promote private investments, the accelerated depreciation tool should be applied for plant and machinery and structures housing them for say another five years.
    Keywords: Personal income;Double taxation;Controlled foreign corporation rules;Foreign assets;Tax law;ISCR,CR,passive income,parent company,tax amnesty,accelerated depreciation,capital gain,CFC income,tax authority
    Date: 2019–11–25
  2. By: International Monetary Fund
    Abstract: This Technical Assistance paper assesses Islamic Republic of Afghanistan government’s finance statistics (GFS). The mission updated the AFMIS bridge tables to enable producing Budgetary Central Government data according to the GFSM 2014 classifications including the economic (object) and functional classifications, reviewed government debt compilation, assisted developing bridge tables for extrabudgetary units, and provided hands-on training for GFS compilers in compiling the data for the general government. Despite good outcomes, the capacity for GFS compilation remains slim and securing support of the management remains critical for both maintaining the current achievements and further improving the government financial data consistent with the GFSM 2014 methodology. Afghanistan has made good steps toward further improving GFS and starting to provide supplementary accrual information, while there have been issues with the quality of the source data. The mission suggests that a GFS Technical Working Group should be set up to coordinate the GFS reforms, address the issues in applying the GFSM 2014 methodology, and advise the Ministry of Finance management on important matters requiring attention.
    Keywords: Government finance statistics;Financial statements;Financial statistics;Fiscal accounting and reporting;Budget planning and preparation;ISCR,CR,GFS compilation,GFS compiler,cash basis,BCG account,compilation method,debt report,GFS reform
    Date: 2019–12–20
  3. By: International Monetary Fund
    Abstract: This technical note on balance sheet risks and financial stability on France discusses that macroprudential policy setting faces the challenge of identifying growth of financial and macroeconomic variables above and below potential. A macro-financial structural model is presented that captures: sectoral dynamics of firms and banks and feedbacks between them; capital and default risk dynamics of each sector; capital and risk gaps i.e., deviations of capital and default risk from potential, and it provides; and a quantitative method for measurement. The report finds that default risk fluctuates during time between being too high and too low. Risk is too high during four episodes: prior to the Technology Crisis, prior to the Global Financial Crisis, prior to the Sovereign Debt Crisis, and now. The analysis implies that firms should be encouraged to strengthen their equity capital base by retaining earnings or issuing equity. This could be done also indirectly by publishing related research.
    Keywords: Insurance companies;Banking;Nonbank financial institutions;Cross-border effects;Debt default;ISCR,CR,financial crisis,capital base,equity capital,risk gap
    Date: 2019–10–29
  4. By: International Monetary Fund
    Abstract: This Technical Assistance report focuses on Philippines’s monetary and financial statistics (MFS). In order to align the coverage of the other depository corporations survey to statistical standards, the mission recommended the inclusion of the money market unit investment trust funds in the survey. With the compilation of other financial corporation’s data, the Philippines is now able to produce intersectoral balance sheet approach (BSA). MFS with full coverage, together with quarterly international investment position and public debt statistics, are the building blocks for the BSA. The mission recommended a detailed action plan with the following priority recommendations carrying weight to make headway in improving MFS quality and completeness. The experience by BSP compilers on data reporting by Securities and Exchange Commission supervised corporations pointed to a need to enhance the Bangko Sentral ng Pilipinas’s (BSP) authority to collect data for statistical purposes, which has been addressed by BSP management. Details on the priority recommendations and the related actions/milestones can be found in the action plan under Detailed Technical Assessment and Recommendations.
    Keywords: Nonbank financial institutions;Offshore financial centers;Securities;Business enterprises;Data collection;ISCR,CR,financial corporations,OFC survey,OFC compiler,money market UITFs,securities statistics
    Date: 2019–12–30
  5. By: Étienne Kintzler; Mathias Lé; Kevin Parra Ramirez
    Abstract: This issue of Economic and Financial Debates provides new insights on offshore financial centers (OFCs) and their role in the international financial system. We first develop a statistical methodology to identify and quantify the importance of these OFCs as counterparties in the total of cross-border banking positions, based on international banking data. This allows us to establish a list of OFCs based on objective and transparent statistical criteria. A list of 13 countries/jurisdictions is derived from this work. We subsequently compute an indicator measuring the degree of extraterritoriality for each banking system based on the OFC list previously compiled in order to quantify their importance in the international financial architecture. It appears that the banking system of a reporting country holds, on average, 1/5 of its asset positions on entities resident in OFCs and receives 1/6 of its liability positions from entities resident in OFCs. Should the scope be limited to interbank positions only, this ratio is 15% on both asset and liability sides. The French banking system is at the median of global distribution and slightly below it compared to banking systems of similar maturity. Overall, the French banking system has more recourse to OFCs for funding purposes than for capital investment purposes and favors 5 OFCs among the 13 we identified. We conduct an analysis of cross-border banking flows during the major stress caused by the financial crisis in 2008 to better understand the financial stability issues raised by OFCs. On the one hand, the volatility of flows vis-à-vis OFCs is, on average, higher than or equal to that observed vis-à-vis major banking systems. On the other hand, the volume of flows to and from the OFCs is similar to those between the largest banking systems. The large volume and very significant volatility of these flows thus underline the financial stability challenges that OFCs are likely to raise. Finally, we apply a community detection method to the graph representing the interbank positions network in order to analyze the organizational pattern of banking systems interactions. Four communities emerge and indicate a very clear regionalization pattern whose perimeters reflect the importance of economic, commercial or geopolitical links in interbank links. The OFCs participate in this regionalization and are each integrated into the nearest geographical area. This integration has been taking place since 2003 and suggests that, despite the increasing interconnection of banking systems, OFCs retain a form of geographical specialization.
    Keywords: .
    Date: 2020
  6. By: Scott R. Baker (Northwestern University, Kellogg School of Management, Department of Finance); Pawel Janas (Kellogg School of Management - Department of Finance); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management)
    Abstract: We develop a comprehensive dataset of state and local taxes from 2000-2015 that includes personal income taxes, property taxes, corporate income taxes, sales taxes, estate taxes and excise taxes. We illustrate how state and local taxes have changed over time, in response to business cycles, and to what extent different taxes co-move within a state or locality. Across states and local jurisdictions, large differences in the mix of taxes are observed, and these differences have tended to become more pronounced over time. Moreover, we note that different types of taxes tend to co-move within a state or local jurisdiction, highlighting the importance for researches to take into account the entirety of the tax system, rather than just a single tax type, when examining household or firm responses to state and local tax changes. At both a state and local level, increases in tax rates of all types tend to increase tax revenue but worsen business conditions and employment.
    Keywords: Local taxes, state taxes, income tax, corporate income tax, sales tax, property tax
    JEL: H20 H71 H72 H77
    Date: 2020–08
  7. By: International Monetary Fund
    Abstract: This Technical Assistance paper on the Russian Federation provides a summary of the changes to Russia’s fiscal transparency practices since 2014 and makes recommendations for further improvements. Russia has made important progress in enhancing the coverage and detail of fiscal reporting since 2014, but assurances of the quality and integrity of fiscal reporting remain incomplete. Reforms to the statistical treatment of taxes and nonfinancial assets have improved the comparability of budgets, statistics, and accounts but transparent reconciliations between the three are still not provided. It is imperative to make Rosstat fully independent of government and produce and publish metadata explaining in an accessible way how the main fiscal indicators or datasets are compiled. The ministry of finance has initiated an annual assessment of the quality of loans and will begin writing-down the value of doubtful debts from 2020. Separate detailed reconciliations of changes to revenue and expenditure are included in the documentation accompanying the annual budget.
    Keywords: Budget planning and preparation;Fiscal risks;Macroeconomic and fiscal forecasts;Oil prices;Fiscal reporting;ISCR,CR,government,Russia,Duma,MoF Directive,Federal budget expenditure
    Date: 2019–10–30
  8. By: International Monetary Fund
    Abstract: This Technical Assistance paper on Ukraine reviews the results of the 2015 fiscal decentralization reform and the amendments to the Budget Code for implementation of certain Public Financial Management reforms. Several design issues are slowing the process of voluntary amalgamation of territorial communities and will lead to a proliferation of small units, with low potential for financial self-sufficiency. Achieving both an overall balance and a vertical fiscal balance, whereby own revenues cover basic expenditure responsibilities and dependence on State grants and subventions is minimized, would require a combination of changes to the revenue-sharing arrangements and expenditure assignments. There is no structured arrangement for ensuring a collaborative and coordinated approach in pursuing broad fiscal objectives and ensuring fiscal sustainability at all levels of government. The authorities should take steps to ensure an active and open dialogue between the different levels on the conduct of fiscal policy.
    Keywords: Budget planning and preparation;Expenditure;Fiscal risks;Legal support in revenue administration;Capital spending;ISCR,CR,State treasury,capital expenditure,state government,State budget,State investment grant
    Date: 2019–11–25
  9. By: Quarm, Richmond Sam; Sam-Quarm, Rosemond; Sam-Quarms, Richmond; Institute of Research, Asian
    Abstract: The salary payment of government workers constitute a significant percentage of total government expenditure in developing economies, simply because the government remains the largest or biggest employer. The Government Payroll system, therefore, requires a robust control mechanism to detect and prevent the occurrence of “payroll fraud”, as the irregularity denies the state of huge sums of monies going down the drain and into private pockets, and which could have otherwise been channelled into some critical sectors of the economy; and to minimise the excessive borrowing by government to fill the gap. The several efforts and reforms by the Controller and Accountant-General’s Department (CAGD) and the Ghana Audit Service (GAS) in particular; and the Ministry of Finance (MoF) in general, to clean the Government Payroll of these “payroll frauds” consistently over the years have not yielded the desired results. The various studies conducted on “payroll fraud” in Ghana did not address themselves to the introduction of the “Electronic-Salary Payment Voucher (E-SPV) system since 2014, which was hailed by many as the final panacea to the “annual ritual of ghost workers on the government payroll”. To fill the gap, we conducted this empirical cross-sectional research on “payroll fraud” based on the “fraud triangle theory” and the “graft estimation model”. We employed non probability purposive, but convenient, sampling methodology by means of structured questionnaires and face-to-face interviews to arrive at our conclusion. Our major finding was that “payroll fraud” can never be eliminated (but only minimised), and must therefore be treated and necessarily managed to the barest minimum (between 1% and 5%), just as normal “bad debts” in Financial Statements. Policy makers will have to revisit the issues about “Ghost Workers”, in the midst of the novel and dreaded, and disastrous Convid-19 pandemic.
    Date: 2020–12–12
  10. By: World Bank
    Keywords: Public Sector Development - Public Sector Expenditure Policy Public Sector Development - Public Financial Management Governance - Democratic Government Governance - Governance and the Financial Sector Governance - National Governance Governance - Parliamentary Government
    Date: 2020–01
  11. By: Yasemin Hurcan; Emre Balibek; Fatoş Koç
    Abstract: Maintaining a cash buffer has emerged as a risk management tool for government cash and debt management. During budget execution, there is considerable cash flow volatility and timing mismatches concerning revenue collections and expenditures, debt inflows, and debt service. Cash balance management aims to address these mismatches and to ensure availability of liquidity in government bank accounts. From a debt management perspective, holding an appropriate level of cash balance serves to mitigate funding risk. Effective cash balance management is even more critical when there is heightened uncertainty about the magnitude and timing of cash flows, as seen during the coronavirus disease (COVID-19) pandemic. This note discusses the role of the cash buffer for managing cash balances and offers practical approaches to developing a policy framework, considering the risk mitigation objectives and the cost of carry.
    Date: 2020–12–21
  12. By: International Monetary Fund
    Abstract: This Technical Assistance paper on the Republic of Madagascar explains the need for the Malagasy authorities to adopt the Government Finance Statistics Manual (GFSM) 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement Project. The report recommends that it is important to improve macroeconomic analysis and monitoring of the overall impact of government finances on the country’s economy, something that other public finance ‘figures’ of a budgetary and accounting nature are not intended to do. The report shows that steady progress continues with the preparation of a bridge table between the chart of accounts and the GFSM 2014 classifications. Notable improvements have been made in the presentation of Other Net Treasury Operations, the detailed components of which were identified and can now be presented on a gross basis. Based on the progress made, the prospect of compiling consolidated GFS covering all subsectors of the Malagasy general government in a not-too-distant future is encouraging.
    Keywords: Government finance statistics;Financial statements;ISCR,CR,accounting,CNaPS,CTD accounting balance,balance
    Date: 2019–10–31
  13. By: Chenxing Li; Yang Yu; Andrew Chi-Chih Yao; Da Zhang; Xiliang Zhang
    Abstract: Expanding multi-country emissions trading system is considered as crucial to fill the existing mitigation gap for the 2\degree C climate target. Trustworthy emissions accounting is the cornerstone of such a system encompassing different jurisdictions. However, traditional emissions measuring, reporting, and verification practices that support data authenticity might not be applicable as detailed data from large utilities and production facilities to be covered in the multi-country emissions trading system are usually highly sensitive and of severe national security concern. In this study, we propose a cryptographic framework for an authenticated and secure emissions accounting system that can resolve this data dilemma. We demonstrate that integrating a sequence of cryptographic protocols can preserve data authenticity and security for a stylized multi-country emissions trading system. We call for more research to promote applications of modern cryptography in future international climate governance to build trust and strengthen collaboration.
    Date: 2020–11
  14. By: International Monetary Fund
    Abstract: This Selected Issues paper examines scope for improving Iceland’s fiscal framework. Iceland’s fiscal framework provides for a forward-looking exercise in consolidated fiscal planning. The Icelandic fiscal framework shares most elements of successful fiscal frameworks but would benefit from more structured guidance in dealing with cyclical fluctuations. It is backed by a firm legal basis that reflects political support for the fiscal policy objectives, covers the consolidated general government, and is based on sound accounting practices and budget management arrangements. The current parameters of the policy rules have a bias to reduce net public debt and gradually build fiscal space to deal with adverse shocks to economic activity. Adding a primary structural balance rule to the framework would ensure a countercyclical fiscal policy but would add significant complexity. Once the net public debt reaches a socially desirable level, the fiscal rule parameters may be modified to keep net public debt fluctuating around that level.
    Keywords: Public debt;Fiscal policy;Fiscal rules;Output gap;Fiscal stance;ISCR,CR,interest rate,countercyclical fiscal policy,disp-formula id
    Date: 2019–12–19
  15. By: Abuselidze, George
    Abstract: The article is devoted to the justification and development of recommendations for improving the use of accounting data for the analysis and control of bankruptcy and reorganization processes of enterprises. It is determined that in conditions of financial and political instability, the activities of enterprises are accompanied by crisis situations, which may result in insolvency or bankruptcy. The peculiarities of processes of bankruptcy and reorganization of enterprises, using the methods of economic analysis, analysis of financial state and efficiency of the investigated company, as well as evaluated the effectiveness of the use of accounting data for analysis and control of processes of bankruptcy and reorganization of enterprises. Overview of cases in business practice for which the company is liquidated. The state and volume of activity of the basic enterprise in the context of the main indicators of financial statements for the last three years are analyzed. As a result of the analysis of the enterprise, it is proved that LLC Agrocomplex is profitable, with positive growth trends for most of the main indicators of economic activity. To identify signs of a crisis, the company assessed the threat of bankruptcy based on rapid diagnostics. The authors proved that the two-factor model for assessing the probability of bankruptcy of an enterprise shows that the probability of bankruptcy for LLC Agrocomplex is very low. The authors prove that when analysing the financial condition of an enterprise, a situation may arise when some indicators of the discriminant model for a particular enterprise may be very low compared to their "normal" values, and others - on the contrary, too high, which is also "bad". It is proved that their combination can indicate a stable financial condition of the enterprise, since it is the calculation of one integral indicator based on all input factors at the same time
    Keywords: Bankruptcy; Crisis; Liquidation; Management Decision
    JEL: M10 M21 M41 M48
    Date: 2020
  16. By: Ã sgeir Daníelsson
    Abstract: In this paper we study volatility of national accounting aggregates for Iceland and compare it to volatility of these aggregates for other OECD countries. The paper uses three different methods to measure volatility: 1) log deviations from trend obtained using HP filter; 2) log deviations from trend obtained using the filter suggested by J.D. Hamilton; 3) log changes in the series. The paper studies effects of filters like seasonal adjustments on measured volatility. In most cases seasonal factors account for much of the variance in the unadjusted time series. Iceland and Ireland are outliers in this respect asseasonal variations explain relatively small part of the variance in the unadjusted series. We compare volatility of quarterly data to volatility of annual data and derive approximate formulas for the measures of volatility in annual data in terms of voltility and autocorrelations of the quarterly series. In most cases measured volatility in quarterly and annual data give similar pictures of the volatility of national accounting aggregates in a given country, but there are exceptions. Iceland is an outlier in this respect as the increase in the volatility of annual data for consumption is very large compared to volatility of seasonally adjusted data when log changes in the series are used to measure volatility. Much higher autocorrelations in the data forseasonally adjusted consumption compared to GDP explain why consumption can be less volatile than GDP in terms of seasonally adjusted quarterly data, but much more volatile in terms of annual data. We also study the relationship between the volatility of consumption and volatility of GDP. In almost half of the countries in our data set of 34 OECD countries consumption is more volatile than income measured by GDP. Finally, this paper studies the relationship between the size of an economy and its volatility and use it to assess if the Icelandic economy is more volatile than is to be expected when its size is taken into account.
    JEL: E01 E30
    Date: 2020–04
  17. By: International Monetary Fund
    Abstract: This technical assistance report on Vietnam discusses evaluation of revised estimates of gross domestic product, to ensure that the compilation process is aligned with the System of National Accounts 2008 (2008 SNA) and that the methodology employed for estimation is consistent and coherent. This mission noted that the revisions follow recommendations of previous missions to implement the 2008 SNA to cover research and development and software will be treated as part of gross fixed capital formation. It is particularly important to conduct outreach to public and private data users to help them to understand the reasons for the revisions. Revisions to statistics are needed to consider changes in data sources and the economic structure. Revisions are a normal and expected part of national accounts compilation, reflecting additional information and new economic developments.
    Keywords: National accounts;Gross fixed investment;ISCR,CR,information,economy,estimate,growth rate
    Date: 2019–12–19
  18. By: Wishnu Mahraddika
    Abstract: This paper examines the association between the real exchange rate (RER) misalignment, exchange rate flexibility, and capital account openness using a panel dataset for 60 developing countries over the period 1980 – 2014. The analysis is based on an alternative measure of RER that is more consistent with the theoretical concept of RER than the commonly used index, and misalignment estimates that account for country-specific underlying factors. The results suggest that the exchange rate regime and capital account policy are significantly related to the degree of persistence and the magnitude of RER misalignment.
    Keywords: Real exchange rate; exchange rate regime; capital account openness
    JEL: F31 F38 F41 O24
    Date: 2020
  19. By: International Monetary Fund
    Abstract: This Detailed Assessment of Observance on Insurance Core Principles on Thailand discusses that the government of Thailand has made a concerted effort to develop the insurance sector. The government has implemented a series of insurance development plans toward this end. Some significant regulatory and supervisory challenges remain, however, if Thailand is to continue to meet the pressures of a changing market and to continue to build the trust on which future growth depends. Consideration should be given to vesting more supervisory authority for key supervisory decisions with the Commission rather than with the Minister and Cabinet. Vesting authority with the Commission will help to ensure that the insurance supervisor has adequate powers to meet the objectives of insurance supervision. With respect to winding up and exit from the market, the insurance legislation should be amended to clearly establish a point at which it is no longer permissible for a troubled insurer to continue in business.
    Keywords: Insurance companies;Insurance;Internal controls;Capital adequacy requirements;Auditing;ISCR,CR,risk management,state enterprise,corporate governance,insurance coverage,steering committee
    Date: 2019–10–24
  20. By: International Monetary Fund
    Abstract: This paper highlights Chad’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement and Financing Assurances Review. Chad’s performance under the Fund’s ECF-supported program has been broadly satisfactory, reflecting strong commitment by the authorities despite a challenging environment, including security concerns and a tense social situation. Good progress on the structural reform agenda has been made, despite some delays. Looking ahead, it is essential that the authorities continue to pursue prudent fiscal policy, particularly in the run up to the upcoming elections, create enough fiscal space for increased social and development spending, and pay down domestic debt and arrears. Chad’s program is supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.
    Keywords: Oil, gas and mining taxes;Arrears;External debt;Expenditure;Oil;ISCR,CR,ECF arrangement,audit result,CBT,Executive Board discussion
    Date: 2019–12–27

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