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The aggregate trade in the market in a community must be accounted for per period of time. As such, the market consists of “flows.” Specifically, the flow of quantity traded is determined after interactions between the two flows of demand schedule and supply schedule; the former slopes downward and the latter upward for various reasons. In the period, a particular unit out of a stock quantity, fixed or not, can change hands zero to multiple times. No household would demand more of a “good” at a higher price. The household surely supplies more working hours at a higher wage rate. Then, the so-called “fixed supply” and “backward-bending curves” are counterfactual: they cannot be so in the given accounting period. Such a saying that the demand for liquidity slopes downward because the interest rate is the opportunity cost is also erroneous: demand must be defined in terms of benefit before being compared to its cost, or “price,” yet to be determined in the market. This essay aims to reevaluate, in hopes of correcting notable misconceptions in microeconomics, how demand and supply schedules should be defined in the product, the “production factor” and the asset markets.

Australia is experiencing cataclysmic weather events largely due to rising atmospheric temperatures caused by greenhouse gas emissions – climate change. A consequence of droughts, floods, fires, tempests and family disasters is the sale or loss of valuable stud stock. In normal trading circumstances these animals would not be sold as trading stock. However the sale of pastoral properties can be beyond the will of the owners for a raft of reasons. Presently the receipts from the sale of ALL animals sold as part of a primary production business are considered to be income according to ordinary concepts by the Australia Taxation Office (ATO) and taxed at ordinary income tax rates. This paper considers the value of animals included in the sale of rural properties in Australia. It argues that the provisions of the Income Tax Assessment Act 1997 (ITAA 1997) are being misinterpreted by tax administrators and tax professionals. Sections 70-10, 995 ITAA 1997 provide that livestock are trading stock – a revenue item. However s 385-100 refers to breeding stock – a capital item. Many practitioners may be interpreting ss 70-10, 995 as applying to ALL livestock. Considering the sale ALL animals traded on the sale of a pastoral lease or farm as revenue denies vendors of concessions permitted under the capital gains tax provisions. This paper considers the income and capital gains tax implications on the sale of animals in conjunction with the sale of pastoral and farming properties in Australia. The distinction between classifying expenditure by an enterprise to be on items of a capital or a revenue nature has long been argued. Generally, in accounting terms, expenditure is considered to be of a capital nature if the benefit of the purchased asset is applied to more than one accounting period.

Commercial insurance system acts like a memoryless system in a way that the premiums paid by the policyholders in one accounting period will be of no avail to them during subsequent periods. Here, we argue that if the insurance scheme is implemented as a not-for-profit trust fund (social insurance) instead of a for-profit limited liability company (commercial insurance) then it will effectively and less expensively hedge against unforeseen losses. If the profit of the insurance company is retained instead of being distributed to the stockholders and there is no agency commission then after a certain number of years, all upcoming claims can be addressed from the interest income of the accumulated profit and the policyholders do not need to pay any premium afterwards. Here, we algebraically calculate the time period required to achieve such a perpetual insurance system as the policyholders after a certain period of time, do no longer need to pay any premium in order to get coverage from losses. In the next step, we empirically calculate the required time period to attain a perpetual zero premium insurance scheme for some 20 (twenty) general insurance companies incorporated in Bangladesh.

In this paper we examine two aspects of the temporary increase in the UK Annual Investment Allowance (“AIA”) maximum, allowance, raised from £200,000 to £1m for the calendar years 2019 and 2020 by UK Finance Act 2019 section 32 and Schedule 13. First we scrutinize the technical operation of the legislation as it affects taxpayers with accounting years that do not correspond exactly with the commencement or termination of the increase. We conclude that there is a potential timing trap for businesses whose accounting period begins during the temporary increase but extends beyond the termination on 31 December 2020. This pitfall can dramatically diminish the available allowance from the headline figure depending on the precise timing of the qualifying expenditure. Secondly, we look at the impact of the temporary increase on the cost of capital for a multinational company when there is the opportunity for profit shifting, comparing this to a UK firm with no such possibility. We show that increased AIA will bring down the cost of capital for UK firms that cannot profit shift to a level similar to that for firms that do migrate profits abroad. In contrast, we find that not only is the cost of capital already lower for firms with opportunities for profit shifting, but also AIA is likely to be less effective in reducing their cost of capital. This in turn suggests that the AIA will not be so successful in stimulating investment by firms that engage in profit shifting. At the same time, the more generous allowance is associated with a narrow tax base for all taxpayers, which would reduce revenue to the UK Exchequer without the intended investment stimulus for many UK firms.

The main objective of this paper is to investigate the quantitative impact of International Financial Reporting Standards (IFRS) on accounting components. IFRS 1 requires IFRS adopter firms to prepare comparative information under IFRS and under local GAAP, which is termed as IFRS-Local GAAP (e.g., IFRS-UK GAAP for the UK) reconciliation statement. This statement shows every accounting line item (in all financial statements) under two accounting systems for the same accounting period, which helps us to know the differences between local GAAP and IFRS. Analysing 1153 Australian listed firms’ reconciliation statements, this study documents that investment value is 35.38 percent higher in IFRS relating to investment value under local GAAP. Financial assets are shown 28.48 percent higher in IFRS relating to financial assets under local GAAP; goodwill is valued 22.60 percent higher in IFRS relating to goodwill value under local GAAP. On the other hand, retained earnings decrease by 23.3 percent under IFRS compared to retained earnings under local GAAP. More importantly, net income increases by 5.64 percent under IFRS compared to those under local GAAP. The findings of this study suggest that IFRS affects significantly accounting components which indicates the value relevance of IFRS. In addition, this study shows the importance of understanding the differences between local accounting standards and international accounting standards. This study will also be beneficial for investors, decision makers, preparers of financial statements, and other users of accounting information. More importantly, this study will be useful to those countries planning to adopt or in the process of adopting international accounting standards (e.g., Indonesia, Japan).

A major trend challenging both tax professionals and the Internal Revenue Service (“IRS” or “Service”) is ever-accelerating globalization, and the resulting compliance challenges of international tax administration. United States (“U.S.”) taxpayers with interests in foreign corporations often need to report their interests to the IRS by including Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, with their annual income tax return. To facilitate timely compliance, Congress imposed penalties for non-compliance starting at $10,000 for each annual accounting period with which a failure to file exists. This article will review Form 5471, who must file it, what information it must contain, how to challenge a penalty, how to correct non-compliance and the impact of the new tax legislation.

The paper analyzes the ways of reporting other comprehensive income (OCI) and their relationships with three different variables, i.e. the volatility, the sign and the total amount of such accounting items. In order to investigate the reasons of such relationships, the study considers the final annual financial statements approved for the accounting periods from 2009 (i.e. the first year in which the 2007 revision of IAS 1 was applied) to 2012 by Italian companies which are required to apply the International Financial Reporting Standards and to follow their updates since 2005. The choice of this specific sample is due to the willingness of verifying the ways of departing from a strong Italian accounting traditional culture which does not consider other comprehensive income (OCI items have never been mentioned by Italian civil code and have not been included in Italian financial reporting). Some preliminary results emphasize the relevance of OCI items. In each accounting period, the majority of the analyzed financial statements show a significant impact of OCI on net income (each amount in absolute value) over a materiality threshold of 10%. In some years also the difference between ROE measured with net income (NI) and ROE measured with comprehensive income (CI) is statistically significant. It demonstrates that the prominence of OCI in evaluating firmsÕ performance potentially should not be ignored. Moreover, the median of changes in OCI is greater than the one of changes in net income, showing that OCI is more volatile than NI. After such preliminary analysis, a logistic analysis has been implemented by considering the above-mentioned variables. Such study brings some important results confirming the significance of the relations between the ways of reporting other comprehensive income and both the sign and the total amount of such accounting items. The analysis has been implemented by using also different versions of the dependent variable in order to investigate the impact of the OCI presentation in two statements which are positioned in two different (i.e. following) pages. So, while the predominance in the use of two statements for OCI presentation shows the willingness to emphasize the traditional profit or loss section and may be related to the influence of a strong Italian accounting traditional culture, the reasons of the use of two different pages for such presentation may represent the signal of Òaccounts managementÓ.

In this paper, we propose the use of the Markov-switching filter to identify investment spikes. In using Markov-switching filter, we apply a first-order two-state Markov-switching mean model to the investment rates de-trended using Hodrick and Prescott's (1997) filter. A Gibbs-sampling procedure is used to produce the marginal posterior distributions of unobserved state variables and model parameters. Among other advantages, this filter allows us to identify multi-year investment spikes. Some investment projects are so large that they last more than one year. Thus, a single annual accounting period would not necessarily reflect the total expenditure necessary to complete the project. Furthermore, even a year-long project need not start at the beginning of an accounting year nor reach completion by the end of an accounting year. We estimate the filter using Compustat data over the period 1988 to 2007 for 504 firms without any missing values in the period. We find that some 86% of firms have lumpy investment using the filter with the 5% level of significance. We also categorize about 12% of firm-years in the sample as having investment spikes.

We study the relationships, for the case of Germany, between inequality in the annual earnings distribution, and subannual inequality and mobility during the course of the year. The study builds on an exact decomposition framework outlined in Wodon and Yitzhaki (2003), and in Yitzhaki and Wodon (2004). The study shows that inequality in the subannual monthly earnings distributions is significantly higher than in the annual earnings distribution. Further, it shows that the mobility component of the decomposition, as measured by Gini correlation coefficients, changes over the observation period. That it changes makes it difficult to predict the impact of the income accounting period on inequality in a more general context. Thus, in distributional analyses it is of paramount importance to use income data from a uniform accounting period.

This paper builds on and contributes to the currently emerging literature on CFO’s compensation and turnover. We focus on the association between the CFO’s compensation and turnover and his/her “accounting talent.” We contend that the accounting talent of CFOs can be measured by accounting errors that occur when a country moves to the International Financial Reporting Standards (IFRS) by adopting a “big bang” approach, in which all firms have to adopt IFRS within the same accounting period without the opportunity of early or late adoption. We hand-collect eighteen different accounting errors for a sample of 280 Australian companies. These are then used to calculate the CFO’s accounting talent. We find (i) a positive relation between the CFO’s accounting talent and the CFO’s compensation ex ante in the transition year, (ii) a positive relation between the CFO’s accounting talent and the CFO’s bonus in the subsequent year (adoption year) and (iii) an inverse relationship between the CFO’s accounting talent and CFO turnover in the subsequent year (adoption year). Further tests on the Chief Executive Officer’s (CEO) accounting talent and compensation and alternative specifications of our variables confirm our results.

An attempt will be made to study the impacts of government policies on the distribution of income, paying close attention to the corresponding response of the different macroeconomic aggregates and balances. The Social Accounting Matrix (SAM) will be chosen as the working instrument. A numerical version of the SAM, constructed from the System of National Accounts (SNA), will serve as the basis for the construction of an algebraic version of the same matrix for Portugal. This methodological choice was linked to the fact that, underlying the SAM, there are interrelated subsystems that, in the numerical version of the matrix, provide an analytical picture of the circular flow or general equilibrium interactions of the market economy, when studied during a particular accounting period. On the other hand, in the algebraic version of the SAM, it is possible to measure and quantify the economy-wide effects of changes in the particular nominal flows represented by the numerical version (injections from and leakages into the system), which might be the result of policy measures. To this end, a computable (numerically solvable) general (economy-wide) equilibrium (macroeconomic balance) approach will be adopted. A SAM-based model will be constructed in perfect consonance with the SNA, in which each cell is defined with a linear equation or system of equations, whose components are all the known and quantified transactions of that system, using the parameters of the numerical SAM that served as the basis for this model. Scenarios will be defined and analyzed from experiments carried out in relation to the distributional impact of government policies.

The use of financial ratios by analysts to compare the performance of firms from one accounting period to the next is of growing importance with continued European economic integration. Recent studies suggest that the individual component series of financial ratios exhibit nonstationarity which is not eliminated by the ratio transformation. In this paper, we derive a generalised model that incorporates stochastic and deterministic trends and allows for restricted and unrestricted proportionate growth in the ratio numerator and denominator. When the individual firm series are included in a panel structure with large N and small T, we are unable to reject convincingly a joint hypothesis of nonstationarity, whilst in about one third of the individual firm panels there is no evidence of a unit root. Although the components of financial ratios are correlated variables, our estimates show that any cointegrating effects decay rapidly.

The aim of this paper is to empirically evaluate the effect of the length of the accounting period on indices of inequality of household income in Israel. There are three main findings: (1) The analysis of the impact of the account period on the Gini index of inequality can be done in a way which is identical to analyzing the effect of the accounting period on the coefficient of variation; (2) Changing the accounting period from one month to three months decreases, on average, the Gini index of inequality by about 1.7%. Furthermore, the Gini index calculated from a three-month accounting period was 3.9-4.1% higher than the index based on a twelve-month period. The change in the accounting period from twelve months to three months accounts for 27 to 37 percent of the increase in inequality in the last two decades, depending on the type of income considered. (3) The above relationship is stable over the years but is sensitive to the definition of income.

In this paper we evaluate the financial performance of virtually all of the branch offices of a large European savings bank for a recent sixmonth accounting period. We employ a complementary pair of nonparametric techniques to evaluate their financial performance, in terms of their ability to conserve on the expenses they incur in the process of building their customer bases and providing customer services valued by the bank. We find substantial variation in the ability of branch offices to perform this task, and substantial agreement on the identity of the branches at the bottom of the performance distribution. We then employ parametric techniques to determine that the list of indicators on which their financial performance is currently evaluated can be substantially reduced without statistically significant loss of information to bank management. Both findings suggest ways in which the bank can increase the profitability of its branch network.