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Were Lobbyists on Income Tax Accounting Influenced by Income Strategies?

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  • NOEL ADDY
  • EDWARD P. SWANSON

Abstract

. This study provides further evidence about whether accounting choice decisions reflect a consistent strategy to manage income by investigating the relation between methods used in financial reports and lobbying positions on accounting for income taxes. A numerical income†strategy score is calculated for each lobbyist based on whether the firm chose an income†increasing or income†decreasing alternative for the following: depreciation, inventory, investment tax credit, and pension amortization. We find that firms lobbying for no tax allocation, the most income†increasing alternative, have higher average income strategies (more income increasing) than firms lobbying for comprehensive allocation, the most income†decreasing alternative. Combining the firms favoring either no allocation or partial allocation (due to the conceptual similarity of these alternatives), we find that their average income strategy score is also higher than firms favoring comprehensive allocation. Further, firms favoring discounting deferred taxes, which would ordinarily increase net income by reducing the deferred portion of income tax expense, employ more income†increasing strategies than firms opposed to discounting. In contrast, the hypothesized relationship was not found between income strategy and when the benefits anticipated from the use of a net operating loss carryforward should be recognized. Nevertheless, the combined lobbying positions differ significantly between both the upper and lower third and upper and middle third of the firms classified by their income strategy scores. We also provide analyses to examine whether income strategies can be used to predict lobbying positions. We find that the associations are not sufficiently strong to do so. Résumé. Les décisions relatives aux choix comptables sont†elles le reflet d'une stratégie uniforme visant la gestion des bénéfices? Les auteurs jettent un éclairage nouveau sur cette question, en analysant la relation entre les méthodes utilisées dans les rapports financiers, et ils approfondissent également celle des positions de lobbying relatives à la comptabilisation des impôts sur le bénéfice. Les auteurs attribuent une note numérique à la stratégie de bénéfice de chaque lobbyiste, selon que l'entreprise a opté pour une méthode qui accroît ou décroît le bénéfice, à l'égard des éléments suivants: l'amortissement, les stocks, le crédit d'impôt à l'investissement et la ventilation des coûts découlant des régimes de retraite. Selon les auteurs, les entreprises qui militent en faveur du non†report des impôts, l'option qui contribue le plus à accroître le bénéfice, poursuivent des stratégies de bénéfice moyen supérieur (contribuant davantage à hausser le bénéfice) que les entreprises qui militent en faveur du report intégral, l'option qui contribue le plus à décroître le bénéfice. Si l'on combine les entreprises qui favorisent le non†report et celles qui favorisent un report partiel (compte tenu de la parenté conceptuelle de ces options), il appert que la note correspondant à leur stratégie de bénéfice moyen est, encore une fois, supérieure à celle des entreprises qui favorisent un report intégral. Plus encore, les entreprises qui favorisent l'actualisation des impôts reportés, ce qui devrait ordinairement accroître le bénéfice net en réduisant la portion différée de la charge fiscale, emploient des stratégies qui accroissent davantage le bénéfice que les entreprises qui s'opposent à l'actualisation. En revanche, la relation dont les auteurs posent l'hypothèse entre la stratégie de bénéfice et le moment de la constatation des avantages que l'on prévoit tirer d'un report prospectif de perte d'exploitation n'a pas été confirmée. Les positions de lobbying combinées s'écartent néanmoins sensiblement si l'on compare le tiers supérieur et le tiers inférieur de même que le tiers supérieur et le tiers médian des entreprises classées en fonction des notes attribuées à leur stratégie de bénéfice. Les auteurs procèdent également à des analyses visant à déterminer si les stratégies de bénéfice peuvent être utilisées pour prévoir les positions de lobbying. Ils en concluent que les associations ne sont pas suffisamment probantes pour permettre ces prévisions.

Suggested Citation

  • Noel Addy & Edward P. Swanson, 1994. "Were Lobbyists on Income Tax Accounting Influenced by Income Strategies?," Contemporary Accounting Research, John Wiley & Sons, vol. 11(1), pages 497-514, June.
  • Handle: RePEc:wly:coacre:v:11:y:1994:i:1:p:497-514
    DOI: 10.1111/j.1911-3846.1994.tb00453.x
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    References listed on IDEAS

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    3. Mian, Shehzad L. & Smith, Clifford Jr., 1990. "Incentives associated with changes in consolidated reporting requirements," Journal of Accounting and Economics, Elsevier, vol. 13(3), pages 249-266, October.
    4. Healy, Paul M. & Kang, Sok-Hyon & Palepu, Krishna G., 1987. "The effect of accounting procedure changes on CEOs' cash salary and bonus compensation," Journal of Accounting and Economics, Elsevier, vol. 9(1), pages 7-34, April.
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    1. Georgiou, George & Roberts, Clare B., 2004. "Corporate lobbying in the UK: an analysis of attitudes towards the ASB's 1995 deferred taxation proposals," The British Accounting Review, Elsevier, vol. 36(4), pages 441-453.
    2. George Georgiou, 2002. "Corporate non-participation in the ASB standard-setting process," European Accounting Review, Taylor & Francis Journals, vol. 11(4), pages 699-722.

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