nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒02‒27
seven papers chosen by

  1. Do Accrual-based Financial Statements Improve Local Public Sector Efficiency? Evidence from Japan By Kondoh, Haruo; Ogawa, Akinobu
  2. Excess Profit Taxes: Historical Perspective and Contemporary Relevance By Mr. Shafik Hebous; Nate Vernon; Dinar Prihardini
  3. Limitations of implementing an expected credit loss model By Bischof, Jannis; Haselmann, Rainer; Kohl, Frederik; Schlueter, Oliver
  4. Measurement of tax expenditures in Latin America By Campos Vázquez, Raymundo Miguel
  5. Nexus among Corporate Governance, Intellectual Capital Disclosure and Firm Performance By Aliyu Muhammad Nasir
  6. A Corporate Income Tax Microsimulation Model for Italy By Chiara Bellucci; Silvia Carta; Sara De Tollis; Federica Di Giacomo; Marco Manzo; Daniela Bucci; Donato Curto; Fabrizio De Grandis; Francesca Sica
  7. Requirements to Join the International Federation of Accountants By Gebreel, Alia Youssef

  1. By: Kondoh, Haruo; Ogawa, Akinobu
    Abstract: After international organizations such as The Organisation for Economic Co-operation and Development (OECD) advocated for national governments to adopt accrual accounting, the number of countries that switched from traditional cash-based accounting to accrual accounting or amended former cash-based accounting is increasing. This change in the accounting system is referred to as the New Public Management (NPM). One of the core elements of NPM is enhancing budget transparency, efficiency, and accountability of decision making using business-like management tools such as the double-entry bookkeeping method. This study examines the impact of the “local public account revolution” on the efficiency of Japanese local governments using a stochastic frontier approach and panel data. We present evidence that preparing business-like financial statements may increase the efficiency of local governments.
    Keywords: Financial statements, Accrual accounting, Efficiency, Fiscal transparency, New public management (NPM)
    JEL: H1 H7
    Date: 2023–02–01
  2. By: Mr. Shafik Hebous; Nate Vernon; Dinar Prihardini
    Abstract: This paper discusses the design of excess profits taxes (EPTs) that gained renewed interest following the COVID-19 outbreak and the recent surge in energy prices. EPTs can be designed as an efficient tax only falling on economic rent, like an allowance for corporate capital, and drawing some parallels with current proposals for reforming multinationals’ taxation. EPTs can be permanent or temporary as an add-on to the corporate income tax to support revenue during an adverse shock episode. The latter reflects experiences with EPTs during and after the World Wars. Different from that era, though, profit shifting is now a challenge. Estimation using firm-level data suggest that, at present, locations of excess profit across countries are consistent with profit shifting practices by multinationals. Destination-based EPTs can address this concern. Estimates suggest that a 10 percent EPT on the globally consolidated accounts of multinationals (on top of the current corporate income tax), with the EPT base being allocated using sales, raises global revenue by 16 percent of corporate income tax revenues. The analysis suggests that international coordination would be desirable to mitigate the risks of profit shifting and tax competition. Eventually, EPTs could mark an evolution of corporate taxation toward a non-distortionary rent tax.
    Keywords: profit shifting; profits tax; com petition; profit tax; excess profits; Corporate income tax; Allowance for corporate equity; Non-wage benefits; Corporate taxes; Global
    Date: 2022–09–16
  3. By: Bischof, Jannis; Haselmann, Rainer; Kohl, Frederik; Schlueter, Oliver
    Abstract: The loan impairment rules recently introduced by IFRS 9 require banks to estimate their future credit losses by using forward-looking information. We use supervisory loan-level data from Germany to investigate how banks apply their reporting discretion and adjust their lending upon the announcement of the new rules. Our identification strategy exploits a cut-off for the level of provisions at the investment grade threshold based on banks' internal rating of a borrower. We find that banks required to adopt the new rules assign better internal ratings to exactly the same borrowers compared to banks that do not apply IFRS 9 around this cut-off. This pattern is consistent with a strategic use of the increased reporting discretion that is inherent to rules requiring forward-looking loss estimation. At the same time, banks also reduce their lending exposure to exactly those borrowers at the highest risk of experiencing a rating downgrade below the cutoff. These loans would be associated with additional provisions in future periods, both in the intensive and extensive margin. The lending change thus mitigates some of the negative effects of increased reporting opportunism on banks' crisis resilience. However, when these firms with internal ratings around the investment grade cut-off obtain less external funding through banks, the introduction of IFRS 9 will likely also be associated with real economic effects.
    Keywords: Bank Accounting, CECL, Expected credit losses, IFRS 9, Impairments, Loans
    JEL: G01 G21 G28 K23 M41
    Date: 2022
  4. By: Campos Vázquez, Raymundo Miguel
    Abstract: The tax system is one of the main instruments used by the State to finance the provision of public goods and services. In the tax system, there are preferential treatments that seek to promote economic activity or support certain sectors. The public revenues forgone by these preferential treatments are known as tax expenditures. The volume of tax expenditures in Latin America is considerable. On average, they were equivalent to 3.8% of GDP and accounted for 20.6% of tax revenues in 2020. Given the need to promote a transformative recovery and finance the implementation of the Sustainable Development Goals, methodologies for quantifying tax expenditures in order to assess their efficiency, effectiveness and equity must be improved. This paper analyses reports on tax expenditures in countries of the region in order to provide a guide for estimating their costs. Based on the best practices identified in these reports, it proposes a set of elements to be taken into account for estimating, analysing and reporting on tax expenditures, with emphasis on the features of the most complete reports.
    Date: 2022–12–01
  5. By: Aliyu Muhammad Nasir (Tunku Puteri Intan Shafinaz School of Accountancy, Universiti Utara Malaysia, Malaysia. Author-2-Name: Ifa Rizad Mustapa Author-2-Workplace-Name: Tunku Puteri Intan Shafinaz School of Accountancy, Universiti Utara Malaysia, Malaysia. Author-3-Name: Kashan Pirzada Author-3-Workplace-Name: Tunku Puteri Intan Shafinaz School of Accountancy, Universiti Utara Malaysia, Malaysia. Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: " Objective - This study conceptually examines a link between corporate governance, intellectual capital disclosure, and firm performance. With the support of signaling theory, this paper develops propositions for the relationship among corporate governance, intellectual capital disclosure, and firm performance. Methodology/Technique - The development and conclusion of this discursive paper as a conceptual one point out the possible relationship among corporate governance, intellectual capital disclosure, and firm performance. The underlying methodology of institutional discourse and integration with dynamic parameters is formalized. Findings - The results of the conceptual framework of this paper on corporate governance are contrasted with the approach to corporate governance in mainstream literature. Also examined is the theoretical and philosophical background of corporate governance, intellectual capital disclosure, and firm performance. Novelty - Although the importance of intellectual capital to firm performance is well established, the triple relationship between the board nomination and governance committee and the board remuneration committee, intellectual capital disclosure, and firm performance is exposed based on the effect of one on another. Type of Paper - Empirical."
    Keywords: Corporate Governance, Intellectual Capital Disclosure, Nomination Committee, and Firm Performance.
    JEL: M40 M41 M49
    Date: 2022–12–31
  6. By: Chiara Bellucci (Ministry of Economy and Finance); Silvia Carta (Ministry of Economy and Finance); Sara De Tollis (Ministry of Economy and Finance); Federica Di Giacomo (Ministry of Economy and Finance); Marco Manzo (Ministry of Economy and Finance); Daniela Bucci (Soluzioni per il Sistema Economico S.p.A. - Sose); Donato Curto (Soluzioni per il Sistema Economico S.p.A. - Sose); Fabrizio De Grandis (Soluzioni per il Sistema Economico S.p.A. - Sose); Francesca Sica (Soluzioni per il Sistema Economico S.p.A. - Sose)
    Abstract: The CITSIM-DF is the corporate tax microsimulation model developed by the Department of Finance in order to estimate the heterogeneous impact of changes in fiscal regulation on average effective tax rates, both in terms of financial and distributional effects. One of the main innovations of the model is the inclusion of forecasts on future economic trends into the simulations, by projecting forward the main fiscal and financial variables. Currently projections are based, at macro level, on national accounts and official projections reflected in the documents of economy and finance. In the next future, the model will be further developed in a now-casting perspective, incorporating in the projections, at micro level, the most recent administrative data available. The model proposes also a new methodology for disentangling investments and historical cost broken by type of asset (buildings, machinery and equipment). CITSIM-DF is based on a unique dataset that integrates administrative data derived from tax returns and financial statements for corporations.
    Keywords: Tax treatment of losses; Allowance for corporate equity; Corporate taxation; Microsimulation
    JEL: C63 H25
    Date: 2023–02
  7. By: Gebreel, Alia Youssef
    Abstract: Requirements to Join the International Federation of Accountants
    Date: 2023–01–08

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.