The Impact Of Fin48 On Earnings Management
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The Impact Of Fin48 On Earnings Management
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Author : Cathalene Rogers Bowler
language : en
Publisher:
Release Date : 2013
The Impact Of Fin48 On Earnings Management written by Cathalene Rogers Bowler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Accounting categories.
The purpose of this study is to examine the impact of FASB Interpretation No. 48 (FIN48), on earnings management. FIN48 is an interpretation of FASB Statement No. 109 (FAS109), instituted by FASB in 2006 to provide stringent disclosure requirements on tax estimates subject to measurement judgment. Because of FIN48 disclosure requirements, managers' ability to manage earnings through deferred tax assets valuation allowance (DTVA) was somehow compromised. Pre-FIN 48 studies on the association between DTVA and earnings management (EM) find mixed evidence. To determine the effectiveness of FIN48 in curtailing DTVA as a tool to manage earnings, this study examines the association between the level of changes in DTVA and five EM motive hypotheses: namely, debt/equity, bonus compensation, political costs, big bath, and income smoothing hypotheses, in the pre- and post-FIN48 periods. Using pooled data of 164 firms from Compustat, for the period 2003-2010, the data is separated into two test periods: pre-FIN48 (2003--2006) and post-FIN48 (2007-2010). The analysis of all five motives in the pre- and post-FIN48 periods reveals that big bath was most prevalent during the pre-FIN48 period. This indicates that managers recorded higher levels of changes in DTVA to manage earnings downward, which supports big bath hypothesis. However, the post-FIN48 period indicates a prevalence of upward earnings smoothing, suggesting that managers recorded lower levels of changes in DTVA to manage earnings upward. Year-by-year cross-sectional regressions also show evidence of political costs, big bath, and downward earnings smoothing motives during the pre-FIN48 period (2003--2006). Although there is no evidence of bonus compensation during this period, there is evidence of bonus maximization, which is an income decreasing motive. So it appears that the pre-FIN48 period was a time of downward EM. For the first two years (2007--2008) of the post-FIN48 period, there is no evidence of any of the five EM motives, which suggests that FIN48 was effective in curtailing the use of DTVA to manage earnings. However, in the latter two years (2009--2010), which was a perilous time of the recession, results show evidence of bonus compensation, earnings smoothing (upward), and big bath motives. This suggests that FIN48 was less effective in a recessionary period. When managers face a recession, with anticipation of a drastic loss, the motivation to survive becomes a more influential factor in mangers' accounting choices. This study contributes to the literature in two major ways. First, it appears to be the first study to conduct a pre- and post-FIN48 analysis of an association between DTVA and EM motives to demonstrate the efficacy of FIN48 to curtail EM. Second, this study updates and resolves the pre-FIN48 mixed evidence of an association between DTVA and EM.-- Abstract.
The Impact Of Increased Disclosure Requirements And The Standardization Of Accounting Practices On Earnings Management Through The Reserve For Income Taxes
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Author : Sonja O. Rego
language : en
Publisher:
Release Date : 2015
The Impact Of Increased Disclosure Requirements And The Standardization Of Accounting Practices On Earnings Management Through The Reserve For Income Taxes written by Sonja O. Rego and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We examine whether the regulatory changes required by the Sarbanes-Oxley Act of 2002 (SOX) and Financial Accounting Standards Board Interpretation No. (FIN) 48 reduced the propensity for earnings management through the reserve for income taxes. Given prior evidence that firms use this reserve to manage earnings to beat the consensus analyst forecast, the regulatory changes implemented by both SOX and FIN 48 allow us to study the effects of accounting regulation on earnings management. We find that neither SOX nor FIN 48 reduced earnings management through the reserve for income taxes. Thus, in contrast to research that examines whether SOX affected nontax, accrual-based earnings management, our results suggest managers continue to take advantage of their discretion over the accounting for income taxes to beat the consensus analyst forecast in both the post-SOX and post-FIN 48 periods.
The Role Of Trait And State Moral Disengagement On Fin 48 Earnings Management
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Author : Ashley West
language : en
Publisher:
Release Date : 2020
The Role Of Trait And State Moral Disengagement On Fin 48 Earnings Management written by Ashley West and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This behavioral study assesses the influence that dispositional trait and situational state moral disengagement tendencies have on an accounting managers' willingness to engage in earnings management in the FIN 48 setting. We develop a measure of state moral disengagement so that we can assess the relative influence of both trait and state moral disengagement on opportunistic FIN 48 accruals that are necessary to meet earnings targets. Findings suggest that both trait and state moral disengagement factors significantly influence accounting manager earnings management. We also find noteworthy trait mediation effects that contribute to our understanding of moral disengagement theory. Overall, we find that trait moral disengagement is more salient than state moral disengagement when both factors are included in regression models. Further, we find that more than forty percent of our sample is willing to participate in egregious earnings management that could constitute fraud. We also find that participants with stronger ethical reasoning capabilities are less likely to participate in severe FIN 48 opportunistic behavior. The study contributes to understanding the theoretical boundaries of moral disengagement and how moral disengagement impacts FIN 48 accruals.
Advances In Taxation
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Author : John Hasseldine
language : en
Publisher: Emerald Group Publishing
Release Date : 2024-06-20
Advances In Taxation written by John Hasseldine and has been published by Emerald Group Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-06-20 with Business & Economics categories.
Volume 31 of Advances in Taxation includes studies from expert contributors, exploring topics such as: firms’ domestic and foreign effective tax rates; tax avoidance; and tax compliance. A study reviews prior literature on tax increment financing, an economic development tool frequently used by U.S. local governments.
Accounting For Income Taxes
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Author : John R. Graham
language : en
Publisher: Now Pub
Release Date : 2012-11-09
Accounting For Income Taxes written by John R. Graham and has been published by Now Pub this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-11-09 with Business & Economics categories.
Accounting for Income Taxes is the most comprehensive review of AFIT research. It is designed both to introduce new scholars to this field and to encourage active researchers to expand frontiers related to accounting for income taxes. Accounting for Income Taxes includes both a primer about the rules governing AFIT (Sections 3-4) and a review of the scholarly studies in the field (Sections 5-8). The primer uses accessible examples and clear language to express essential AFIT rules and institutional features. Section 3 reviews the basic rules and institutional details governing AFIT. Section 4 discusses ways that researchers, policymakers, and other interested parties can use the tax information in financial statements to better approximate information in the tax return. The second half of the monograph reviews the extant scholarly studies by splitting the research literature into four topics: earnings management, the association between book-tax differences and earnings characteristics, the equity market pricing of information in the tax accounts, and book-tax conformity. Section 5 focuses on the use of the tax accounts to manage earnings through the valuation allowance, the income tax contingency, and permanently reinvested foreign earnings. Section 6 discusses the association between book-tax differences and earnings characteristics, namely earnings growth and earnings persistence. Section 7 explores how tax information is reflected in share prices. Section 8 reviews the increased alignment of accounting for book purposes and tax purposes. The remainder of the paper focuses on topics of general interest in the economics and econometric literatures. Section 9 highlights some issues of general importance including a theoretical framework to interpret and guide empirical AFIT studies, the disaggregated components of book-tax differences and research opportunities as the U.S. moves toward International Financial Reporting Standards (IFRS). Section 10 discusses econometric weaknesses that are common in AFIT research and proposes ways to mitigate their deleterious effects.
Line Item Analysis Of Earnings Quality
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Author : Melumad Nahum
language : en
Publisher: Now Publishers Inc
Release Date : 2009
Line Item Analysis Of Earnings Quality written by Melumad Nahum and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Business & Economics categories.
Line-Item Analysis of Earnings Quality provides a comprehensive summary and analysis of the specific earnings quality issues pertaining to key line item components of the financial statements. After providing an overview of earnings quality and earnings management, Line-Item Analysis of Earnings Quality analyzes key line items from the financial statements. For each key line item, the authors: review accounting principles; discuss implications for earnings quality; evaluate the susceptibility of the item to manipulation; describe analyses and red flags which may inform on the item's quality. Line-Item Analysis of Earnings Quality will prove useful in conducting fundamental and contextual analyses through its analysis and evaluations.
Ifrs Standards Deferred Tax Related To Assets And Liabilities Arising From A Single Transaction
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Author : IFRS FOUNDATION.
language : en
Publisher:
Release Date : 2021
Ifrs Standards Deferred Tax Related To Assets And Liabilities Arising From A Single Transaction written by IFRS FOUNDATION. and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
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Author : James M. Wahlen
language : en
Publisher: Cengage Learning
Release Date : 2010-08-10
Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective written by James M. Wahlen and has been published by Cengage Learning this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-08-10 with Business & Economics categories.
Wahlen/Baginski/Bradshaw is a balanced, flexible, and complete Financial Statement Analysis book that is written with the premise that students learn financial statement analysis most effectively by performing the analysis on actual companies. Students learn to integrate the concepts from economics, finance, business strategy, accounting, and other business disciplines through the integration of a unique six-step process. Important Notice: Media content referenced within the product description or the product text may not be available in the ebook version.
Taxing Corporate Income In The 21st Century
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Author : Alan J. Auerbach
language : en
Publisher: Cambridge University Press
Release Date : 2007-04-16
Taxing Corporate Income In The 21st Century written by Alan J. Auerbach and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-04-16 with Business & Economics categories.
This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.
Differences Between Fin 48 And Ifric 23
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Author : Carolin Seibert
language : en
Publisher: Springer Nature
Release Date : 2022-08-31
Differences Between Fin 48 And Ifric 23 written by Carolin Seibert and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-08-31 with Business & Economics categories.
Uncertainties about the tax treatment of business transactions in the tax return or tax balance sheet can cause significant accounting challenges for current and deferred taxes in the financial statements. Whereas the accounting treatment of tax risks or tax audit risks has been regulated under US GAAP since 2006, a corresponding IFRS regulation was only published in 2017 and is effective from the 2019 fiscal year. The author takes this as an opportunity to analyze and critically assess the differences between the US GAAP accounting regulation “FIN 48 – Accounting for Uncertainty in Income Taxes” and the IFRS accounting regulation “IFRIC 23 – Uncertainty over Income Tax Treatments”. Building on the insights from her analysis, the author also examines the problem areas arising from IFRIC 23 from the perspective of the German tax authorities, German business practice and German advisory practice.