Deslandes, Manon et Landry, Suzanne
(2007).
« Taxable Income, Tax-Book Differences and Earnings Quality » (30th Annual Congress of the European Accounting Association, Lisbonne, Portugal, 25-27 avril 2007)
Fichier(s) associé(s) à ce document :
Résumé
The financial scandals (Enron, WorldCom) of the past few years have emphasized the importance for investors to consider the quality of earnings reported by listed entities. For that purpose, reported earnings are often compared to figures such as cash flow from operations (CFO). More recently, US researchers have attempted to measure earnings quality using taxable income and tax-book differences.
Taxable income and tax-book differences could help assessing earnings quality since it would be unusual for an entity to report high earnings while showing little tax liability. Also, measurement of taxable income is usually not as flexible as reported earnings. An unusual gap between these two figures may indicate financial statement manipulations, aggressive tax behaviour or less persistent reported earnings i.e. of inferior quality.
Using a data set of Canadian firms, the paper investigates whether taxable income and tax-book differences provide additional information (beyond CFO and accruals) to investors in assessing earnings quality. The results support our hypotheses.
In many European countries, there is a strong link between accounting earnings and taxable income as financial accounting complies to a great extent with the tax law. The adoption of the IFRS by European countries may have a major impact on corporate tax bases since several countries may have to adopt tax rules (not GAAP) in line with their economic and political objectives; lessening the relationship between the two figures. This paper contributes to the literature in this domain.
![[img]](http://archipel.uqam.ca/style/images/fileicons/application_pdf.png)
RECHERCHER
PARCOURIR
LIBRE ACCÈS
