Reconciling Competing Reporting Objectives Through Deferred Tax Accounts: Evidence on Private Italian Firms

References

• Atwood, T., Drake, M., & Myers, L. (2010). Book-tax conformity, earnings persistence and the association between earnings and future cash flows. Journal of Accounting and Economics, 50(1), 111–125. https://doi.org/10.1016/j.jacceco.2009.11.001
   Web of Science ®Google Scholar
• Badenhorst, W. M., & Ferreira, P. H. (2016). The financial crisis and the value-relevance of recognised deferred tax assets. Australian Accounting Review, 26(3), 291–300. https://doi.org/10.1111/auar.12101
   Web of Science ®Google Scholar
• Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: Comparative loss recognition timeliness. Journal of Accounting and Economics, 39(1), 83–128. https://doi.org/10.1016/j.jacceco.2004.04.001
   Web of Science ®Google Scholar
• Ball, R., & Shivakumar, L. (2006). The role of accruals in asymmetrically timely gain and loss recognition. Journal of Accounting Research, 44(2), 207–242. https://doi.org/10.1111/j.1475-679X.2006.00198.x
   Web of Science ®Google Scholar
• Bauman, C., Bauman, M., & Halsey, R. (2001). Do firms use the deferred tax asset valuation allowance to manage earnings? Journal of the American Taxation Association, 23(s-1), 27–48. https://doi.org/10.2308/jata.2001.23.s-1.27.
   Google Scholar
• Beaver, W. H., McNichols, M. F., & Nelson, K. K. (2007). An alternative interpretation of the discontinuity in earnings distributions. Review of Accounting Studies, 12(4), 525–556. https://doi.org/10.1007/s11142-007-9053-0
   Web of Science ®Google Scholar
• Bethman, I., Jacob, M., & Mueller, M. A. (2018). Tax loss carrybacks: Investment stimulus versus misallocation. The Accounting Review, 93(4), 101–125. https://doi.org/10.2308/accr-51956
   Web of Science ®Google Scholar
• Beuselinck, C., Elfers, F., Gassen, J., & Jochen Pierk, P. (2023). Private firm accounting: The European reporting environment, data and research perspectives. Accounting and Business Research, 53(1), 38–82. https://doi.org/10.1080/00014788.2021.1982670
   Web of Science ®Google Scholar
• Bianchi, P. (2018). Auditors joint engagement and audit quality: Evidence from Italian private companies. Contemporary Accounting Research, 35(3), 1533–1577. https://doi.org/10.1111/1911-3846.12327
   Web of Science ®Google Scholar
• Bigus, J., & Häfele, S. (2016). Shareholder loans and earnings smoothing: Empirical findings from German private firms. European Accounting Review, 27(1), 37–74. https://doi.org/10.1080/09638180.2016.1229206
   Web of Science ®Google Scholar
• Bigus, J., & Hillebrand, C. (2017). Bank relationships and private firms’ financial reporting quality. European Accounting Review, 26(2), 379–409. https://doi.org/10.1080/09638180.2016.1152906
   Web of Science ®Google Scholar
• Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126. https://doi.org/10.1016/S0165-4101(97)00017-7
   Web of Science ®Google Scholar
• Burkart, M., & Ellingsen, T. (2004). In-kind finance: A theory of trade credit. American Economic Review, 94(3), 569–590. https://doi.org/10.1257/0002828041464579
   Web of Science ®Google Scholar
• Cascino, S., Clatworthy, M., García Osma, B., Gassen, J., Imam, S., & Jeanjean, T. (2014). Who uses financial reports and for what purpose? Evidence from capital providers. Accounting in Europe, 11(2), 185–209. https://doi.org/10.1080/17449480.2014.940355
   Google Scholar
• Chen, W., Hribar, P., & Melessa, S. (2018). Incorrect inferences when using residuals as dependent variable. Journal of Accounting Research, 56(3), 751–796. https://doi.org/10.1111/1475-679X.12195
   Web of Science ®Google Scholar
• Chircop, J., Fabrizi, M., Malspina, P., & Parbonetti, A. (2023). Anti-mafia police actions, criminal firms, and peer firm tax avoidance. Journal of Accounting Research, 61(1), 243–277. https://doi.org/10.1111/1475-679X.12455
   Web of Science ®Google Scholar
• Christensen, T., Paik, G., & Stice, E. (2008). Creating a bigger bath using the deferred tax valuation allowance. Journal of Business Finance & Accounting, 35(5–6), 601–625. https://doi.org/10.1111/j.1468-5957.2008.02092.x
   Web of Science ®Google Scholar
• Coppens, L., & Peek, E. (2005). An analysis of earnings management by European private firms. Journal of International Accounting, Auditing and Taxation, 15(1), 1–17. https://doi.org/10.1016/j.intaccaudtax.2005.01.002
   Google Scholar
• Degeorge, F., Patel, J., & Zeckhauser, R. (1999). Earnings management to exceed thresholds. Journal of Business, 72(1), 1–33. https://doi.org/10.1086/209601
   Web of Science ®Google Scholar
• Dhaliwal, D., Gleason, C. A., & Mills, L. F. (2004). Last-chance earnings management: Using the tax expense to meet analyst forecasts. Contemporary Accounting Research, 21(2), 431–458. https://doi.org/10.1506/TFVV-UYT1-NNYT-1YFH
   Web of Science ®Google Scholar
• Flagmeier, V. (2022). The information content of deferred tax under IFRS. European Accounting Review, 31(2), 495–518. https://doi.org/10.1080/09638180.2020.1826338
   Web of Science ®Google Scholar
• Frank, M. M., & Rego, S. O. (2006). Do managers use the valuation allowance account to manage earnings around certain earnings targets? The Journal of the American Taxation Association, 28(1), 43–65. https://doi.org/10.2308/jata.2006.28.1.43
   Google Scholar
• Gaeremynck, A., & Veugelers, R. (1999). The revaluation of assets as a signalling device: A theoretical and an empirical analysis. Accounting and Business Research, 29(2), 123–138. https://doi.org/10.1080/00014788.1999.9729574
   Google Scholar
• Garrod, N., Kosi, U., & Valentincic, A. (2008). Asset write-offs in the absence of agency problems. Journal of Business Finance and Accounting, 35(3–4), 307–330. https://doi.org/10.1111/j.1468-5957.2008.02078.x
   Web of Science ®Google Scholar
• Gassen, J., & Fülbier, T. W. (2015). Do creditors prefer smooth earnings? Evidence from European private firms. Journal of International Accounting Research, 14(2), 151–180. https://doi.org/10.2308/jiar-51130
   Web of Science ®Google Scholar
• Gavana, G., Guggiola, G., & Marenzi, A. (2013). Evolving connections between tax and financial reporting in Italy. Accounting in Europe, 10(1), 43–70. https://doi.org/10.1080/17449480.2013.774733
   Google Scholar
• Gordon, E. A., & Joos, E. A. (2004). Unrecognized deferred taxes: Evidence from the U.K. The Accounting Review, 79(1), 97–124. https://doi.org/10.2308/accr.2004.79.1.97
   Web of Science ®Google Scholar
• Graham, J. R., Jana, S. R., & Shackelford, D. A. (2012). Research in accounting for income taxes. Journal of Accounting and Economics, 53(1–2), 412–434. https://doi.org/10.1016/j.jacceco.2011.11.006
   Web of Science ®Google Scholar
• Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(3), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002
   Web of Science ®Google Scholar
• Herbon, K., Tutticci, I., & Khor, P. S. (2010). Changes in unrecognised deferred tax accruals from carryforward losses: Earnings management or signalling? Journal of Business Finance and Accounting, 37(7), 763–791. https://doi.org/10.1111/j.1468-5957.2010.02207.x
   Web of Science ®Google Scholar
• Holland, K., & Jackson, H. J. (2004). Earnings management and deferred tax. Accounting and Business Research, 34(2), 101–123. https://doi.org/10.1080/00014788.2004.9729956
   Google Scholar
• Hope, O., Thomas, W. B., & Vyas, D. (2017). Stakeholder demand for accounting quality and economic usefulness of accounting in U.S. Private firms. Journal of Accounting and Public Policy, 36(1), 1–13. https://doi.org/10.1016/j.jaccpubpol.2016.11.004
   Web of Science ®Google Scholar
• Hope, O., & Vyas, D. (2017). Private company finance and financial reporting. Accounting and Business Research, 47(5), 506–537. https://doi.org/10.1080/00014788.2017.1303963
   Web of Science ®Google Scholar
• Kosi, U., & Valentincic, A. (2013). Write-offs and profitability in private firms: Disentangling the impact of tax-minimisation incentives. European Accounting Review, 22(1), 117–150. https://doi.org/10.1080/09638180.2012.661938
   Web of Science ®Google Scholar
• Laux, R. C. (2013). The association between deferred tax liabilities and future tax payments. The Accounting Review, 88(4), 1357–1383. https://doi.org/10.2308/accr-50417
   Web of Science ®Google Scholar
• Leuz, C. (1998). The role of accrual accounting in restricting dividends to shareholders. European Accounting Review, 7(4), 579–604. https://doi.org/10.1080/096381898336204
   Google Scholar
• Leuz, C. (2010). Different approaches to corporate reporting regulation: How jurisdictions differ and why. Accounting and Business Research, 40(3), 229–256. https://doi.org/10.1080/00014788.2010.9663398
   Web of Science ®Google Scholar
• Mafrolla, E., & D’Amico, E. (2017). Borrowing capacity and earnings management: An analysis of private loans in private firms. Journal of Accounting and Public Policy, 36(4), 284–301. https://doi.org/10.1016/j.jaccpubpol.2017.05.001
   Web of Science ®Google Scholar
• Max, M., Whielhouwer, J., & Wiersma, E. (2023). Estimating and imputing missing tax loss carryforward data to reduce measurement error. European Accounting Review, 32(1), 55–84. https://doi.org/10.1080/09638180.2021.1924812
   Web of Science ®Google Scholar
• McGuinness, G., Hogan, T., & Powell, R. (2018). European trade credit and SME survival. Journal of Corporate Finance, 49(2), 81–103. https://doi.org/10.1016/j.jcorpfin.2017.12.005
   Google Scholar
• McGuire, S. T., Neuman, S. S., Olson, A. J., & Omer, T. C. (2016). Do investors use prior tax avoidance when pricing tax loss carryforwards? The Journal of the American Taxation Association, 38(2), 27–49. https://doi.org/10.2308/atax-51483
   Google Scholar
• Miller, G. S., & Skinner, D. J. (1998). Determinants of the valuation allowance for deferred tax under SFAS No. 109. Contemporary Accounting Research, 73(2), 213–233. https://www.jstor.org/stable/248466
   Google Scholar
• Mills, L. F., & Newberry, K. (2001). The influence of tax and nontax costs on book-tax reporting differences: Public and private firms. Journal of the American Taxation, 23(1), 1–19. https://doi.org/10.2308/jata.2001.23.1.1
   Google Scholar
• Mitton, T. (2022). Economic significance in corporate finance. The Review of Corporate Finance Studies, https://doi.org/10.1093/rcfs/cfac008
   PubMed Web of Science ®Google Scholar
• Mura, A., & Ecca, V. (2022). The impact of peer effects on earnings smoothing. Rivista Italiana di Ragioneria e di Economia Aziendale, 122(5–8), 210–224. https://doi.org/10.17408/RIREAAMVE050607082022
   Google Scholar
• Mura, A., Emmanuel, C., & Vallascas, F. (2013). Challenging the reliability of comparables under profit-based transfer pricing methods. Accounting and Business Research, 43(5), 483–505. https://doi.org/10.1080/00014788.2013.798581
   Web of Science ®Google Scholar
• Mura, A., & Roberto, G. (2014). Nature and duration of the accounting differences between Italian and US GAAP: A case study on conservatism. Journal of Applied Accounting Research, 15(1), 2–21. https://doi.org/10.1108/JAAR-04-2012-0027
   Google Scholar
• Mura, A., & Roberto, G. (2020). Realised earnings vs smooth earnings: The choice of Italian private firms. Rivista Italiana di Ragioneria e di Economia Aziendale, 120(3), 336–354. https://doi.org/10.17408/RIREAAMGR091011122020
   Google Scholar
• Nagar, V., Petroni, K., & Wolfenzon, D. (2011). Governance problems in closely held corporations. Journal of Financial and Quantitative Analysis, 46(4), 943–966. https://doi.org/10.1017/S0022109011000226
   Web of Science ®Google Scholar
• Nobes, C. (2003). A conceptual framework for the taxable income of businesses, and how to apply it under IFRS. Certified Accountants Educational Trust.
   Google Scholar
• Nobes, C., & Schwencke, H. R. (2006). Modelling the links between tax and financial reporting: A longitudinal examination of Norway over 30 years up to IFRS adoption. European Accounting Review, 15(1), 63–87. https://doi.org/10.1080/09638180500510418
   Web of Science ®Google Scholar
• Oliveras, E., & Puig, X. (2005). The changing relationship between tax and financial reporting in Spain. Accounting in Europe, 2(1), 195–207. https://doi.org/10.1080/09638180500379020
   Google Scholar
• Phillips, J., Pincus, M., & Rego, S. O. (2003). Earnings management: New evidence based on deferred tax expense. The Accounting Review, 78(2), 491–521. https://doi.org/10.2308/accr.2003.78.2.491
   Web of Science ®Google Scholar
• Prencipe, A., Bar-Yosef, S., Mazzola, P., & Pozza, L. (2011). Income smoothing in family-controlled companies: Evidence from Italy. Corporate Governance: An International Review, 19(6), 529–546. https://doi.org/10.1111/j.1467-8683.2011.00856.x
   Web of Science ®Google Scholar
• Scholes, M., & Wolfson, M. (1992). Taxes and business strategy: A planning approach. Prentice-Hall, Inc.
   Google Scholar
• Schrand, C. M., & Wong, M. H. (2003). Earnings management using the valuation allowance for deferred tax assets under SFAS No. 109. Contemporary Accounting Research, 20(3), 579–611. https://doi.org/10.1506/480D-098U-607R-5D9W
   Web of Science ®Google Scholar
• Shackelford, D. A., & Shelvin, T. (2001). Empirical tax research in accounting. Journal of Accounting and Economics, 31(1–3), 321–387. https://doi.org/10.1016/S0165-4101(01)00022-2
   Web of Science ®Google Scholar
• Skinner, D. J. (2008). The rise of deferred tax assets in Japan: The role of deferred tax accounting in the Japanese banking crisis. Journal of Accounting and Economics, 46(2–3), 218–239. https://doi.org/10.1016/j.jacceco.2008.07.003
   Web of Science ®Google Scholar
• Szczesny, A., & Valentincic, A. (2013). Asset write-offs in private firms: The case of German SMEs. Journal of Business Finance & Accounting, 40(3), 285–317. https://doi.org/10.1111/jbfa.12017
   Web of Science ®Google Scholar
• Tang, T. Y. H. (2015). Does book-tax conformity deter opportunistic book and tax reporting? An International Analysis. European Accounting Review, 42(3), 441–469. https://doi.org/10.1080/09638180.2014.932297
   Google Scholar
• Tokey, J. W. (1962). The future of data analysis. The Annals of Mathematical Statistics, 33(1), 1–67. https://doi.org/10.1214/aoms/1177704711
   Google Scholar
• Trueman, B., & Titman, S. (1988). An explanation for accounting income smoothing. Journal of Accounting Research, 26(Suppl.), 127–139. https://doi.org/10.2307/2491184
   Google Scholar
• Vanstraelen, A., & Schelleman, C. (2017). Auditing private companies: What do we know? Accounting and Business Research, 47(5), 565–584. https://doi.org/10.1080/00014788.2017.1314104
   Web of Science ®Google Scholar
• Van Tendeloo, B., & Vanstraelen, A. (2008). Earnings management and audit quality in Europe: Evidence from the private client segment market. European Accounting Review, 17(3), 447–469. https://doi.org/10.1080/09638180802016684
   Web of Science ®Google Scholar
• Visvanathan, G. (1998). Deferred tax valuation allowances and earnings management. Journal of Financial Analysis, 3(1), 6–15. https://www.jstor.org/stable.3203262
   Google Scholar
• Zang, A. Y. (2012). Evidence on the trade-off between real activity manipulation and accrual-based earnings management. The Accounting Review, 87(2), 676–703. https://www.jstor.org/stable/23245619
   Web of Science ®Google Scholar