nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒12‒11
thirteen papers chosen by

  1. The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting By Albersmann, Benjamin T.; Quick, Reiner
  2. Seychelles: Technical Assistance Report-Stress Testing the Central Bank Balance Sheet By International Monetary Fund
  3. Capturing risks in accounting, the case of extractive industries By Véronique Blum; Charlotte Krychowski
  4. Global minimum corporate income tax: Challenges and prospects for Uganda By Corti Paul Lakuma; Rehema Kahunde
  5. Distributional effects of taxation in Latin America By Pessino, Carola; Rasteletti, Alejandro; Artana, Daniel; Lustig, Nora
  6. Did Uganda's corporate tax incentives benefit the Ugandan economy or only the firms? By Nicholas Musoke; Tereza Palanská; Caroline Schimanski
  7. Income-based tax relief for R&D and innovation: An integrated view By OECD
  8. Have Fed Asset Purchases Reshaped Bank Balance Sheets? Part 2 By William R. Emmons
  9. The Effects of CBDC on the Federal Reserve's Balance Sheet By Christopher J. Gust; Kyungmin Kim; Romina Ruprecht
  10. Essays on corporate disclosures, innovation, and investments By Ahçi, Mustafa
  11. Lost in Information: National Implementation of Global Tax Agreements By Alstadsæter, Annette; Casi, Elisa; Miethe, Jakob; Stage, Barbara M. B.
  12. Are low-income workers financially irresponsible? An analysis of financial and accounting practices in Nairobi By Thereza Balliester Reis; Vincent Mugo Kamau
  13. The Economic Consequences of Fiscal Rules By Niklas Potrafke

  1. By: Albersmann, Benjamin T.; Quick, Reiner
    Abstract: This study investigates whether goodwill impairments are perceived as timely and whether specific auditor characteristics affect the perceived timeliness. It therefore contributes to central questions in accounting research: is managerial discretion over accounting numbers (accounting choice) good or bad for stakeholders and does audit quality have an impact on this relationship? It is motivated by the IASB's post‐implementation review on business combinations and the Goodwill and Impairment project based on it, the ongoing debate on the decision usefulness of impairment testing, and the question whether auditors have an impact on firms’ reporting of impairment losses. Based on a sample of German listed firms for the period 2006 to 2013, the results indicate that goodwill impairments are not recognized in a timely manner and delayed by at least one to two years. Moreover, the findings suggest that the recognition of impairment losses is influenced by auditor characteristics. In particular, firms seem to report goodwill impairments in a more timely fashion when they are audited by a Big 4 auditor, whereas the timeliness seems to decrease with a higher non‐audit fee ratio and a longer auditor tenure. Moreover, additional analyses indicate that higher audit fees lead to more timely impairments.
    Date: 2023–11–14
  2. By: International Monetary Fund
    Abstract: A Technical Assistance (TA) mission was conducted in Victoria, Seychelles, from July 17 to 27, 2023, to assist the authorities in stress testing the balance sheet of the Central Bank of Seychelles (CBS). The TA mission focused on: (i) reviewing the CBS financial reporting from an International Financial Reporting Standards 9 Financial Instruments point of view; (ii) stress-testing the CBS balance sheet for several deterministic scenarios, as well as for credit, interest rate, and exchange rate risks; (iii) evaluating the CBS operating expenses based on an international comparison, and (iv) helping the CBS to prepare the communication around a possible recapitalization. The technical assistance report provides an overview of the results emanating from these tasks and provides key recommendations on recapitalization, as well as on the implementation of measures to improve financial reporting and financial risk management. Moreover, the report provides a detailed summary of the technical components of Central Bank Operations Division of the IMF Monetary and Capital Markets Department’s central bank stress-testing model – which in conjunction with a three-day workshop conducted during the mission on running the model – provides guidance to authorities on institutionalizing this model to routinely conduct stress-testing of the CBS balance sheet.
    Keywords: Central bank stress-testing; Recapitalization; Financial reporting in IFRS 9; Operating expenses international comparison.
    Date: 2023–11–07
  3. By: Véronique Blum (UGA - Université Grenoble Alpes); Charlotte Krychowski (LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], IMT-BS - MMS - Département Management, Marketing et Stratégie - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris])
    Abstract: In their intent to define standards related to extractive activities, many accounting standard setters have addressed the following question: What estimate of future growth prospects is useful to investors in addition to balance sheet and income statement information? Our study uses the Ohlson model (1995) on a sample of 52 companies, listed over a period of 11 years (1996-2006) in order to test the relevance of 4 forward-looking vectors, as complements to the book value and net earnings : the optional values of oil reserves, the free cash flows, the capex and the crude oil price volatility. Our results suggest that a heuristic reserve value based on informational items contributing to a real option pricing is the most informative and least redundant forward-looking value. They question the usefulness of reporting of forward-looking results in the form of point estimates.
    Abstract: Alors qu'ils cherchaient à définir une norme spécifique aux activités extractives, de nombreux normalisateurs comptables ont tenté de répondre à la question suivante : quelle estimation des perspectives de croissance future est utile aux investisseurs en complément des informations issues du bilan et du compte de résultat ? Notre étude emploie le modèle d'Ohlson (1995) sur un échantillon de 52 entreprises cotées pendant une période de 11 ans (1996-2006) et examine la pertinence informationnelle de quatre vecteurs orientés vers le futur : la valeur optionnelle des réserves de pétrole, les flux de trésorerie disponibles, les capex et la volatilité du prix du pétrole brut. Nos résultats suggèrent qu'une valeur heuristique des réserves considérées comme une option réelle sur un volume de pétrole découvert est la plus informative et la moins redondante des valeurs prospectives testées. Ils remettent en cause l'utilité de la communication de résultats futurs sous forme d'estimations ponctuelles.
    Keywords: Accounting, Extractives industries, Petroleum industry, Financial evaluation, Petroleum reserves, Ohlson model, Comptabilité, Industries extractives, Evaluation financière, Réserves pétrolières, Modèle d'Ohlson
    Date: 2023
  4. By: Corti Paul Lakuma; Rehema Kahunde
    Abstract: This paper simulates the impact of the global minimum corporate tax rate (GMCTR) in Uganda by estimating the difference between the mechanical and the behavioural changes in tax revenue. Overall, implementation of GMCTR will increase tax revenue, and the revenue increase is inversely proportional to the behavioural response. The differences in elasticities may introduce tax competition. In addition, the revenue gain is positive but quantitatively small. There are also sectoral differences in revenue gain resulting from the GMCTR.
    Keywords: Corporate tax, Effective tax rate, Tax revenue, Tax administration, Base erosion, Profit shifting
    Date: 2023
  5. By: Pessino, Carola; Rasteletti, Alejandro; Artana, Daniel; Lustig, Nora
    Abstract: This chapter analyzes the incidence on income distribution by a comprehensive array of direct and indirect taxes in ten Latin American countries circa 2018. The study finds that although there is a significant heterogeneity, the redistributive impact is equalizing for direct taxes and unequalizing for indirect taxes. Overall, redistribution through taxes, without accounting for spending effects and interactions, is slightly equalizing for some countries and unequalizing for others, but the burden on the poor is high and even higher than on the rich. This is mainly a consequence of the high share of indirect taxes in the tax structures, and of low personal income tax collection and coverage. The inclusion of the redistributive effect of the corporate income tax contributes to improve redistribution and accounts for better comparison with the redistributive impact in more developed countries, where dividends are taxed heavily with personal income taxes rather than corporate income taxes as in Latin America. High levels of evasion and informality make payroll taxes more regressive in integrated labor markets with high informality, but make indirect taxes less regressive, since the poor pay little or no indirect taxes on some of their purchases.
    Keywords: taxes; inequality; informality; Latin America
    JEL: D31 E26 H22 H26 N36
    Date: 2023–11–01
  6. By: Nicholas Musoke; Tereza Palanská; Caroline Schimanski
    Abstract: Uganda has one of the lowest corporate income tax collection rates in sub-Saharan Africa, while offering generous corporate tax incentives. It is unclear whether tax incentives achieve their objectives without primarily benefiting firms, potentially undermining domestic revenue mobilization and encouraging tax avoidance. Using Uganda's administrative tax data for 2014-21 and a new tax incentive dataset, this study shows that tax holidays and the reintroduction of investment allowances are associated with a significant increase in investment and mostly with higher workforce-related expenses.
    Keywords: Corporate tax, Tax incentive, Domestic revenue mobilization, Administrative data, Tax data, Developing countries, Tax avoidance
    Date: 2023
  7. By: OECD
    Abstract: This document provides an integrated view on income-based tax incentives for R&D and innovation. It brings together the latest evidence on the adoption, design, generosity, cost and take-up of income-based tax incentives, and gives new insights into both the long-term and short-term trends in the take-up of income-based tax incentives by business and their cost to governments, including role of policy design changes. Furthermore, the report explores the scope for developing indicators that provide a more complete picture of the value of expenditure- and income-based tax relief for R&D and innovation in the OECD area and beyond.
    Keywords: innovation, Research and development, tax incentives
    JEL: H25 O38 O34
    Date: 2023–11–24
  8. By: William R. Emmons
    Abstract: The de-risking of commercial banks’ balance sheets since 2008 likely reflects regulatory changes and economic conditions rather than the Fed’s bond buying.
    Keywords: asset purchases; bank balance sheets; COVID-19
    Date: 2022–02–01
  9. By: Christopher J. Gust; Kyungmin Kim; Romina Ruprecht
    Abstract: We propose a parsimonious framework to understand how the issuance of central bank digital currency (CBDC) might affect the financial system, the Federal Reserve's balance sheet, and the implementation of monetary policy. We show that there is a wide range of outcomes on the financial system and the Federal Reserve's balance sheet that could reasonably occur following CBDC issuance. Our analysis highlights that the potential effects on the financial sector depend critically on how the Fed manages its balance sheet. In particular, CBDC could in principle put substantial upward pressure on the spread of the federal funds rate and other wholesale funding rates over the interest rate on reserves unless the Fed expanded its balance sheet to accommodate CBDC issuance.
    Keywords: Central bank digital currency; Monetary policy implementation; Bank disintermediation; Central bank balance sheet
    JEL: E50 E51 E52 E58
    Date: 2023–11–03
  10. By: Ahçi, Mustafa (Tilburg University, School of Economics and Management)
    Date: 2023
  11. By: Alstadsæter, Annette (School of Economics and Business, Norwegian University of Life Sciences); Casi, Elisa (Dept. of Business and Management Science, Norwegian School of Economics); Miethe, Jakob (Dept. of Economics, University of Munich); Stage, Barbara M. B. (WHU – Otto Beisheim School of Management)
    Abstract: This paper studies how national implementation shapes individual responses to global agreements by looking at the introduction of the multilateral standard for automatic information exchange on financial assets, i.e., the Common Reporting Standard (CRS). We utilize rich micro-level data on all bank transfers to Norway. This provides us with unparalleled detail on hidden ownership structures. These data show a significant increase in cash repatriation from tax havens post-CRS implementation. Yet, we document substantial heterogeneity in responses down to a null result if CRS enforcement is weak. Relying on macroeconomic data on cross-border bank deposits, we employ model averaging techniques to establish the most important characteristics of the receiving countries that make the CRS more effective. Our results suggest that a highly digitized tax administration triggers twice the drop in tax haven deposits compared to a tax administration relying on paper tax returns. These results have implications for global policy initiatives more broadly.
    Keywords: Global Tax Agreements; Tax Evasion; Financial Flows; Tax Enforcement
    JEL: F42 G21 H26
    Date: 2023–11–13
  12. By: Thereza Balliester Reis (Department of Economics, SOAS University of London); Vincent Mugo Kamau (Independent Researcher)
    Abstract: Studies on financial inclusion place strong emphasis on financial literacy and individual financial responsibility. Over-spending and over-indebtedness are often thought to be consequences of a lack of understanding of prudent budgeting, saving, and investment. Building on the critical accounting and everyday financialisation literature, this study challenges those claims. By interviewing 30 low-income workers in Nairobi, Kenya, we find that many are highly financially literate and have extensive knowledge on how to save on transaction costs and to select optimal borrowing opportunities. In fact, participants report several new techniques to save on costs, such as splitting transactions on M-Pesa to avoid fees. Yet, as their income is low, those individuals often find themselves indebted over sustained periods, particularly for basic needs such as food and transport. Furthermore, where individuals select costly financial services or are unable to save for the future, these seem to be consequences of structural and income constraints rather than a lack of understanding of accounting practices. Taken together, our article critiques established understandings of financial knowledge by presenting new evidence on everyday financial practices in Nairobi. Our results suggest that financialisation of everyday life has spread to countries beyond the Global North and might have severe consequences for development goals.
    Keywords: everyday life financialisation; financial literacy; critical accounting; Kenya
    JEL: B50 D14 G51 G53
    Date: 2023–11
  13. By: Niklas Potrafke
    Abstract: Fiscal rules are controversial. They mitigate politicians’ flexibility in responding to shocks and pursuing expansionary fiscal policy. They help, however, to handle politicians’ commitment problem in fiscal policies. I portray the new and fast growing empirical literature in public economics that examines the economic consequences of fiscal rules. The survey encompasses the literature on fiscal rules at the national, sub-national and local level. The results show that fiscal rules reduce budget deficits, public spending and borrowing costs and increase GDP growth. The results do not suggest that fiscal rules decrease public investment. Future research should examine in more detail the unintended effects of fiscal rules such as how they relate to creative accounting.
    Keywords: fiscal rules
    JEL: H50 H60 H70 N10 O10 R10
    Date: 2023

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