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on Accounting and Auditing |
| By: | Carlo Alberto Magni |
| Abstract: | Accounting measures are traditionally considered not significant from an economic point of view. In particular, accounting rates of return are often regarded economically meaningless or, at the very best, poor surrogates for the IRR, which is held to be “the” economic yield. Likewise, residual income does not enjoy, in general, periodic consistency with the project NPV, so residual income maximization is not equivalent to NPV maximization. This paper shows that the opposition accounting/economic is artificial and, taking a capital budgeting perspective, illustrates the strong (formal and conceptual) connections existing between economic measures and accounting measures. In particular, the average accounting rate of return is the correct economic yield of a project; the traditional IRR is (whenever it exists) only a particular case of it. The average accounting rate generates a decision rule which is logically equivalent to the NPV rule for both accept/reject decisions and project ranking. The paper also shows that maximization of the simple arithmetic mean of residual incomes is equivalent to NPV maximization, owing to its periodic consistency in the sense of Egginton (1995). Such an index may then be used for incentive compensation as well. Moreover, asset pricing may be interpreted in accounting terms as the process whereby the market determines the income impact on the assets’ value. As a result, the paper harmonizes the notions of accounting rate of return, internal rate of return, residual income, net present value: they are just different ways of cognizing the same notion. This conciliation stems in a rather natural way from three sources: (i) a fundamental accounting identity, which links income and cash flow in a comprehensive way, (ii) the definition of Chisini mean, (iii) a notion of residual income which takes account of the “real” (comprehensive) cost of capital. |
| Keywords: | Capital budgeting; accounting rate of return; economic yield; internal rate of return; residual income; net present value; average; Chisini mean; cost of capital |
| JEL: | M41 G11 G12 G31 D81 M52 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:mod:wcefin:09121&r=acc |
| By: | Joël Houdet (Orée (association) - (-)); Charlotte Pavageau (AgroParisTech ENGREF - (-)); Michel Trommetter (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, INRA - UMR GAEL INRA); Jacques Weber (CIRAD - Unité de recherche Ressources forestières et politiques publiques) |
| Abstract: | Biodiversity refers to the dynamics of interactions between organisms in changing environments. Within the context of accelerating biodiversity loss worldwide, firms are under increasing pressures from stakeholders to develop appropriate tools to account for the nature and consequences of their actions, inclusive of their influences on ecosystem services used by other agents. This paper presents a two-pronged approach towards accounting for changes in biodiversity and ecosystem services from a business perspective. First, we seek to analyze how Environmental Management Accounting (EMA) may be used by firms to identify and account for the interactions between their activities and biodiversity and ecosystem services (BES). To that end, we use dairy farming as a case study and propose general recommendations regarding accounting for changes in biodiversity and ecosystem services from a management accounting perspective. Secondly, after discussing the corporate reporting implications of the main environmental accounting approaches, we propose the underlying principles and structural components of a Biodiversity Accountability Framework (BAF) which would combine both financial and BES data sets; hence, suggesting the need for changes in business accounting and reporting standards. Because this would imply significant changes in business information systems and corporate rating practices, we also underline the importance of making the associated technological, organizational and institutional innovations financially viable. The BAF should be designed as an information base, coconstructed with stakeholders, for setting up and managing new modes of regulation combining tools for mitigating BES loss and remunerating BES supply. |
| Keywords: | Accounting, business, biodiversity, ecosystem services, indicators, management accounting, financial accounting, reporting, corporate social responsibility, standards, biodiversity accountability framework. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00434450_v1&r=acc |
| By: | Stefan Bach; Hermann Buslei |
| Abstract: | In order to calculate the burden of a comprehensive and progressive income tax falling on a certain income source, an apportionment scheme for the entire tax burden has to be chosen. This raises the question of how to deal with losses, which is relevant for Germany in view of the heavy losses from renting. Using micro data from tax statistics we analyze the income tax shares of functional income sources for three apportionment schemes. The choice of the apportionment scheme markedly affects the tax shares of income sources and the implicit tax rates, in particular those of capital income. |
| Keywords: | Income and business income taxation, implicit tax rates by income sources |
| JEL: | H24 H25 D33 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp950&r=acc |
| By: | Cintra, Marcos |
| Date: | 2009–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:238&r=acc |
| By: | Sebastian Krautheim (Centre d'Economie de la Sorbonne - Paris School of Economics); Tim Schmidt-Eisenlohr (European University Institute) |
| Abstract: | Larger firms are more likely to use tax haven operations to exploit international tax differences. We study a tax game between a large country and a tax haven modeling heterogenous monopolistic firms, which can shift profits abroad. We shows that a higher degree of firm heterogeneity (a mean-preserving spread of the cost distribution) increases the degree of tax competition, i.e. it decreases the equilibrium tax rate of the large country, leads to higher outflows of its tax base and thus decreases its equilibrium tax revenue. Similar effects hold for a higher substitutability across varieties. We find that models with homogeneous firms understate the strenght of tax competition. |
| Keywords: | Heterogenous firms, tax competition, profit shifting, tax havens. |
| JEL: | F23 H25 H87 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:09073&r=acc |
| By: | Nathaniel Frank (Oxford-Man Institute and Department of Economics, University of Oxford) |
| Abstract: | In this paper we analyse market co-movements during the global financial crisis. Using high frequency data and accounting for market microstructure noise and non-synchronous trading, interdependencies between differing as-set classes such as equity, FX, fixed income, commodity and energy securities are quantified. To this end multivariate realised kernels and GARCH models are employed. We find that during the current period of market dislocations and times of increased risk aversion, assets have become more correlated when applying these intra-day measures. FX pairs seemingly lead the other variables, but commodities remain entirely unaffected. |
| Keywords: | Financial crisis, high frequency data, kernel based estimation |
| JEL: | C32 E44 |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:0904&r=acc |
| By: | Vauhkonen, Jukka (Bank of Finland Research) |
| Abstract: | We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank’s probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully or partially disclosed to market participants by the Pillar 3 disclosures. We show that, under stringent Pillar 3 disclosure requirements, banks’ equilibrium probability of success and total welfare may be higher under a simple Basel II standardized approach than under the more sophisticated internal ratings-based (IRB) approach. |
| Keywords: | Basel II; capital requirements; information disclosure; market discipline; moral hazard |
| JEL: | D43 D82 G14 G21 G28 |
| Date: | 2009–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2009_029&r=acc |