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on Accounting and Auditing |
| By: | Batiz-Lazo, Bernardo; Billings, Mark |
| Abstract: | This article explores the manipulation of published financial reports in order to counter the potentially unfavourable impact of newly introduced regulation. In this case the reported capital ratio of a major building society was enhanced using a sale and leaseback transaction with a related party and a change in depreciation policy, methods which reflected limited alternatives. Analysis of the case is set in the context of the mid-term performance of the building society sector and addresses the questions of whether the manipulations involved were within then-prevailing generally accepted accounting principles and why, despite disclosure in the society’s financial statements, these failed to attract public comment or concern, regulatory action or an audit qualification. In examining a major British mutual financial organisation we depart from traditional analyses of managerial discretion in accounting choices in manufacturing, mining and transport companies prior to the watershed Companies Act 1948. |
| Keywords: | Accounting manipulation; Creative accounting; Sale and leaseback; Depreciation; Building societies; United Kingdom |
| JEL: | N24 M42 D82 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18805&r=acc |
| By: | Huizinga, Harry; Laeven, Luc |
| Abstract: | This paper presents evidence of banks using accounting discretion to overstate the value of distressed assets. In particular, we show that the stock market applies far greater discounts to a bank’s real estate loans and mortgage-backed securities than are implicit in the book values of these assets, especially following the onset of the U.S. mortgage crisis. This suggests that bank balance sheets overvalue real estate related assets during economic slowdowns. Estimated discounts are smaller for distressed banks, as these banks derive relatively large benefits from the financial safety net to offset asset impairment. We also find that bank share prices, especially for banks with large exposures to mortgage-backed securities, react favorably to recent changes in accounting rules that relax fair value accounting. Banks with large exposures to mortgage-backed securities are also found to provision less for bad loans. Finally, we find that banks, and especially distressed banks, use discretion in the classification of mortgage-backed securities so as to inflate the book value of these securities. Our results provide several pieces of compelling evidence that banks’ balance sheets offer a distorted view of the financial health of the banks, especially for banks with large exposures to real estate loans and mortgage-backed securities, and suggest that recent changes that relax fair value accounting may further distort this picture. |
| Keywords: | accounting standards; bank regulation; fair value accounting; financial crisis; mortgage-backed securities; real estate loans |
| JEL: | G14 G21 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7381&r=acc |
| By: | Gil S. Epstein (Bar-Ilan University); Ira N. Gang (Rutgers University) |
| Abstract: | In this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing potential tax evaders will decide to emulate other tax evaders. |
| Keywords: | Tax evasion, Information Cascades, Uncertainty |
| JEL: | H26 H31 D82 |
| Date: | 2009–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:200902&r=acc |
| By: | Florence TOUYA |
| Abstract: | Tax Interactions with Asymmetric Information and Nonlinear Instruments |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:tac:wpaper:9&r=acc |
| By: | Nazim Belhocine |
| Abstract: | This paper measures the size of the stock of intangible capital in Canada using newly released data on the market value of all securities in the economy. The approach taken relies on a quantitative application of the q-theory of investment to generate the quantity of capital owned by firms. I find that the intangible capital stock accounted for approximately 30% of overall capital since 1994. Of this intangible capital stock, the R&D reported by national accounts makes up only 23%. In addition, the finding on the magnitude of the intangible capital stock is comparable to that reported using a cost approach, confirming the size and the relevance of intangibles to macroeconomic models. |
| Keywords: | Accounting , Canada , Capital , Capital goods , Corporate sector , Economic models , Investment , National income accounts , Stock markets , Stock prices , |
| Date: | 2009–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/250&r=acc |
| By: | Shigenori Shiratsuka (Associate Institute for Monetary and Economic Studies, Bank of Japan (E-mail:shigenori.shiratsuka@boj.or.jp)) |
| Abstract: | This paper re-examines Japanfs experience of the quantitative easing policy in light of the policy responses against the current financial and economic crisis. Central banks use various unconventional measures in the range of financial assets being purchased and in the scale of such purchases. As the scope of such unconventional measures expands, it is often emphasized that the U.S. Federal Reserve policy reactions focus more on the asset side of its balance sheet, the so- called credit easing. By contrast, the Bank of Japanfs quantitative easing policy from 2001 to 2006 set a target for the current account balances, the liability side of its balance sheet. It is crucial to understand that central banks combine the two elements of their balance sheets, size and composition, to enhance the overall effects of unconventional policy measures, given constraints on policy implementation. |
| Keywords: | Quantitative easing, Credit easing, Unconventional monetary policy, Central bank balance sheet |
| JEL: | E44 E52 E58 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:09-e-25&r=acc |
| By: | Keisuke Otsu (Faculty of Liberal Arts, Sophia University (E-mail: k-otsu@sophia.ac.jp)) |
| Abstract: | In this paper, I extend the business cycle accounting method a la Chari, Kehoe and McGrattan (2007) to a two-country international business cycle model and quantify the effect of the disturbances in relevant markets on the business cycle correlation between Japan and the US over the 1980-2008 period. This paper finds that disturbances in the labor market and production efficiency are important in accounting for the recent increase in the cross-country output correlation. If international financial market integration is important for considering the recent increase in cross-country output correlation, it must operate through an increase in the cross-country correlation of disturbances in the labor market and production efficiency, and not in the domestic investment market. |
| Keywords: | Business Cycle Accounting, International Business Cycles |
| JEL: | E32 F41 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:09-e-29&r=acc |