Economic Substance Research Articles

IMPROVING THE ECONOMIC PRACTICES OF THE ENERGY SERVICE CONTRACTS IN RUSSIA

The article considers the nature of the performance contract, considered the options of energy service companies, schematically presented models of economic substance of consumption and savings of energy during implementing of energy service contract. Also, considered the practical application of energy service contracts in Russia and other countries, identified priorities and directions which allow to develop energy services technology and run economic procedures of funding this work by the banks side.

Economic substance and purpose of outsourcing

Economic substance and purpose of outsourcing

ЭКОНОМИЧЕСКАЯ СУЩНОСТЬ СОВРЕМЕННОГО ИНВЕСТИЦИОННОГО ПРОЦЕССА НА ПРЕДПРИЯТИЯХ ЗЕРНОПЕРЕРАБАТЫВАЮЩЕЙ ПРОМЫШЛЕННОСТИ

The subject of the research is theoretical and methodological bases of formation of effective investment in priorities feed processing industry in Ukraine. The object of research is the investment process in feed processing Ukrainian industry, the main direction and the way to increase the efficiency of the investment process in the industry. The aim is to develop an integrated approach to the study of the economic substance of investments to improve the methods to determine their effectiveness, the study of factors of investment environment, study methodology for determining business risk, development of proposals of the priority areas of investing in feed processing industry, the formation of effective investment strategies for its development in the conditions of market transformation. Methods . We used the following methods: dialectical, abstract logic, Economics and Statistics and the systemic-functional methods of knowledge of economic processes. The dialectical method has allowed the author to analyze the development of research in the last five years, identified reserves and propose ways for its further development. Abstract-logical method of waste classification of the factors influencing the efficiency of the investment process in the industry, the methodological approaches to the formation of the components of the conceptual apparatus studied category. Economic-statistical method used in the study and synthesis of trends and patterns of the dynamics of the industry at the present stage. Systemic-functional method allowed to generalize the theoretical and methodological foundations of development effectiveness feed processing industry. The study also used methods: a comparative analysis – for comparing actual data reporting and previous years; model approach – to determine the entrepreneurial risk in the enterprises of the industry; expert assessments and cost approaches to identify key trends and ways to improve the country’s industrial development feed processing industry in the transformation of the economy. Results . Based on the analysis of modern approaches to conditions of increased in-vestment and innovation, continuous improvement of its effectiveness concluded that the creation of fair competition. Civilized competitive environment ensures that each share of investment in innovation combined with a positive effect – increases the number of jobs and the amount of product reduces the cost per unit of output. Significant investment resources for the industry can be attracted by privatization, provided that it will be transparent and competitive. To attract investment in such an important sector for Ukraine, it is necessary to understand and improve the motivation of investors, taking into account the European integration process: the main promising markets for products and services; favorable geographic location of investment targets; increase their competitiveness through the organization of production on the territory of a party that receives the in-vestment; low labor costs in its qualifications.

Confidence of accountants in applying international financial reporting standards

Research on how accountants could increase their confidence in interpreting and applying International Financial Reporting Standards (IFRS) is lacking. This study examines whether the accuracy of judgments made by accountants varies as a consequence of their level of confidence, and whether their confidence in exercising judgments could be enhanced by greater familiarity with IFRS. The results of the study support that accountants who are more confident make judgments that better reflect the economic substance of a transaction than accountants who are less confident. The results further indicate that familiarity with IFRS enhances the confidence of accountants and the most accurate judgments are made by those accountants who are not only familiar with IFRS but also have confidence in their judgments.

Fair Value and Volatility in the Cases of Assets Securitization, Derivative Hedging and Loan Loss Provisioning

The concept of fair value is a key element in the international accounting standards and its implementation poses serious concerns in terms of financial stability. There are a number of issues which are particularly important for financial stability that are evidenced in the GFC and have been received much attention in the reform of fair value regime, namely assets securitization, derivatives hedging and loan loss provisioning. This study analyzes and shows the way in which financial reporting for fair values could create volatility through the processes of assets securitization, derivative hedging and loan loss provisioning. The other objectives of financial reporting, namely reliability and comparability, are achievable only if the measures of fair value are reliable and relevant. Fair value measurement is supported on the ground that it provides information which is more relevant to the economic substance and presumably such information will be more useful to investors. Nonetheless, changes in the market landscape and financial innovation are evident and accounting standards so far have not kept pace with the development of financial market which is revealed in this study by analyzing the transactions of assets securitization, derivative hedging and loan loss provisioning.

Is K-IFRS Accounting Information Quality Different by Industries?

The vast change of business environment in recent times requires a strong need to enhance accounting consistency and quality throughout the world. To meet this demand Korea has adopted IFRS(International Financial Reporting Standards) for all listed public companies from the year 2011. However, the effects of application of IFRS on financial reporting quality has been inconsistent. Further, since IFRS emphasizes economic substance and accounting principles, it has been considered that the application of IFRS will have different impact in different industries. The purpose of this study is to evaluate the effect of IFRS application on the quality of accounting information in different industries. This study examine the quality of accounting information in different industries for KSE(Korean Stock Exchange) listed companies during years from 2007 to 2013(three years before adoption of IFRS in 2011 and three years since IFRS adoption). Using discretionary accruals calculated with modified Jones model, this study examine by industries the difference between actual and tentative earnings and the prediction error of current accruals. This study documents that after IFRS adoption the quality of accounting information improved in general. Analysis of discretionary accruals by industries shows that accounting quality is higher in production industry. Discretionary accruals is lower in advanced technology industries, implying accounting quality in those industries is higher. Also, this paper provides an evidence that manufacturing industries exhibits higher accounting quality, whereas cultural industry(ind-16) appears to have poor accounting quality. After IFRS adoption, companies in the similar categories of industries appears to use similar accounting procedures. These findings suggest that to increase the comparability of accounting information it is demanding to establish category-oriented accounting principles and practices which can reflect the economic substances of the each business category.

Komparace zachycování výnosů v České republice a podle IAS/IFRS

Publicly traded companies prepare their consolidated accounts in conformity with the international accounting standards (IAS/IFRS) in accordance with the Regulation No. 1606/2002. This is obliged for all publicly traded joint-stock companies in the Czech Republic. Other companies prepare financial statements in accordance with national accounting standards. There are Accounting Act No. 563/1991 of Coll. and Regulation No. 500/2002 of Coll., Czech Accounting Standards in the Czech Republic. Both systems are based on different principles so there are many differences. The Czech Accounting System (CAS) is based on the rules while IAS/IFRS are based on principles (Kovanicová, 2005). These differences are mainly caused by the different philosophy. CAS prefers the fiscal policy to the economic substance while IAS/IFRS prefere the economic substance. One of the most significant dif­fe­ren­ces is in the field of revenue recording. There are two standards concerning the revenues recording (IAS 18 − Revenue, IAS 11 – Construction Contracts) in IAS/IFRS. CAS 019 – Expenses and Revenue are dealing with the revenue recording in the Czech Republic. The paper is aimed at the comparison of the methodical approaches for revenue recording used by IAS/IFRS and by CAS. The most important differences are caused by the different approach to the long term contracts (construction contracts, software development contracts) revenues recording.

Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine

Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm and describe its application in two recent tax cases.

The System of Product Quality Control as a Factor of Crisis in Economic Security of Meat Packing Plants of Ukraine

The purpose of the study is a disclosure of the essence of a product control system, as a component of economic security and means of crisis prevention for meat packing plants. The following objectives are defined in the research: to explore the theoretical basis of product and systems within the enterprise and describe the impact of product on the probability of a crisis and the economic security of meat packing enterprises of Ukraine. In the study, the place of product in the structure of economic safety within meat packing enterprises of Ukraine is found. The economic essence of notions of and quality system are disclosed. The main factors influencing the of the product are outlined. It was provided a clear definition of economic substance of these concepts, as well as identified the major classifications, which should contribute to further scientific development of crisis management mechanisms needed when providing economic security and sustainable development of meat packing enterprises of Ukraine.

US Supreme Court unanimously chooses substance over form in foreign tax credit case: implications of the PPL decision for the creditability of cash-flow taxes

In a recent unanimous decision in the PPL case, the US Supreme Court ruled that a one-time retroactive British “Windfall Tax” levied on 32 public utilities that were privatized between 1984 and 1996 was eligible for the US foreign tax credit (FTC). The Court rejected the contention of the US Internal Revenue Service that eligibility for the FTC should be governed by the legislative form of the tax rather than its economic substance. This decision could have far-reaching implications for the creditability of taxes that are not ordinarily thought to be income taxes, including various cash-flow business taxes that are key elements of several proposals recommending replacement of the income tax with a consumption-based tax. This article examines these issues, arguing that one and arguably both of the most common forms of cash-flow consumption-based taxes should be creditable; it also discusses questions that remain about the interpretation of key regulatory requirements that govern creditability.

Table of Contents

AbstractTreasury/IRS to Repropose Political Activity RegulationsSocial Media Comments Help Torpedo Recognition of ExemptionGovernment Hay‐Cutting Causes Property to Be Exempt Function AssetIRS Issues Another Mistaken PLR on Board GovernanceOther Recent IRS Private Letter RulingsConservation Easement LitigationABA Tax Section Submits Comments on Proposed Political Activities RegulationsShams, Lack of Economic Substance, and the Charitable DeductionIRS Publishes Data Concerning Charitable OrganizationsSplit‐Interest Trust Filings Continue to DeclineOther Developments

Essence and Economical Substance of Innovative Cluster in Territorially Localized Business System

The article describes different methodological; approaches to determine economical substance of innovative cluster on the level of regional economy of Russia from the point of view of foreign and Russian economists. The key elements of the notion of National innovative system on the basis of approaches of International organization of cooperation and development are determined. DOI: 10.5901/mjss.2014.v5n12p159

The Economic Substance Doctrine and China’s Power to Tax Income from Indirect Equity Transfers by Non-Resident Enterprises

The indirect transfer of equity in a Chinese resident corporation by a foreign investor that is a non-resident enterprise through transferring shares in an intermediate holding company is a common technique used in cross-border capital flows. According to the Corporate Income Tax Law of China, the place where a company is located (i.e., registered) determines the location of transfers of equity in that company and which country has the power to tax that transfer, which also gives rise to the problem of the legal scope of this taxing power. The State Administration of Taxation has issued relevant documents to establish the economic substance doctrine, adopting a “look-through approach” to negate the existence of an intermediate holding company and accordingly claim jurisdiction to tax in order to deal with the growing problem of base erosion and profit shifting. The taxing power on indirect transfers does not apply, however, to a transfer which has reasonable commercial purposes or meets the special provisions in tax treaties. China should develop rules through legislation to clarify the specific circumstances relating to such “reasonable commercial purposes”, to provide specific exemption from tax for cross-border internal restructuring-related indirect equity transfers, to introduce an advance ruling system, and to perfect the mechanisms for monitoring revenue sources.

Economic Substance versus Legal Form: Financial Transactions as Taxable Events

The author provides an in-depth analysis of whether economic substance should be the general principle applied to tax financial transactions, including consideration of the approaches suggested by tax scholars and some tax authorities around the world.

It's Time for the Supreme Court to Review the Economic Substance Doctrine (Amicus Brief)

In United States v. Woods, this writer submitted an amicus brief arguing that the Supreme Court should reserve its judgment about the economic substance doctrine, which the district court had applied below. The Supreme Court agreed with that argument, expressly leaving its opinion about the proper application of the economic substance doctrine to a future case.That future case has arrived. This amicus brief, supporting the taxpayer’s petition in WFC Holdings v. United States, explains why this case presents the perfect opportunity for the Court to explain what weight, if any, legislative enactments enjoy in deciding economic substance cases. Although this brief is directed to the Justices, it should appeal to anyone who follows developments related to the economic substance doctrine.

Codification of the Economic Substance Doctrine and the Gregory Case

ABSTRACT Gregory v. Helvering is a landmark case in the area of corporate reorganizations. The concepts that evolved from Gregory include the business purpose test, continuity of business, the taxpayer's right to minimize tax liability, step transaction doctrine, and the economic substance doctrine. The Treasury Department sought a codification of the economic substance doctrine as a necessary weapon to curb the growth of corporate tax shelters. While the doctrine had been part of the fabric of our tax system since Gregory, it had been eroded by some confusing and conflicting case law. In 2010 (the 75th anniversary of Gregory), Congress codified the economic substance rules. In order to understand this new legislation it is necessary to explore the long and grand history of the Gregory case as a backdrop for consideration of the merits and demerits of the codification of the economic substance doctrine.

Entre la forma y el contenido: crítica a la interpretación económica de los hechos jurídicos.

Abstract: This paper is about the substance-form dichotomy and its limits trough the philosophy perspective, acknowledging its limitations. It intends to criticize the doctrine that emphasizes the prevalence of the economic substance over the legal form trough the disregarding of the last for taxation purposes.

Economic nature of money as an object of civil rights

Problem setting. In general, scientific attention is paid to the bipolar nature of money, which is shown in the economic origin and legal stipulation of their existence. That is why, before considering money as a legal category, we need to pay attention to their economic specifics. Recent research and publications analysis. The issue at different times were explored by such scholars as J. M. Keynes, K. Marx, K. L. McConnell, S. L. Brue, I. Fischer, M. Friedman, A. Hayek, P. P. Tsitovich, L. A. Luntz, G. F. Shershenevich, A. S. Galchinskiy, O. V. Sokolova, S. A. Tchernetsov, G. N. Beloglazova, L. A. Novoselova. Paper objective. The objective of the paper is the clarification of the economic nature of money as an object of civil rights and detection of economic and legal connections in the considered object. Paper main body. Economic nature of money usually appears in the definitions offered by various scholars. Money is defined as allowable mean of exchange, which is accepted in exchange for goods and services and can be used for the accumulation of wealth and future use. According to the dominated approach in the western economy, money is something that performs the functions of money. Today, the functional approach is the priority for determining the economic nature of money. 2 Conclusions of the research. Thus, it can be concluded that the economic nature of money is determined by the functions they perform in property turnover. Based on the economic functions of money, we can set the basic direction of the influence of money in the law in general and civil law relations in particular. Abstract. The article is devoted to the analysis of the economic segment in the doctrine of money as the object of civil rights. The main approaches to determining the economic substance of money are examined, especially functional approach, which was approved by the economic and legal science. Key words: money, the economic nature of money, the economic functions of money, civil law functions of money.

A Two-Step Representation of Accounting Measurement

An essay is presented which focuses on a two-step representation of accounting measurement and shows that it can improve one's understanding of accounting's institutional features. The first step focuses on a transaction's economic substance which is seen in different transaction characteristics. The second step is a measurement rule for mapping from transaction characteristics to an accounting report.

Penalties: Unintended Consequences of the Economic Substance Penalty

In 2010, Congress codified the economic substance doctrine and created a strict liability penalty for understatements attributable to transactions that did not have economic substance. Recent court decisions have refused to invalidate transactions based on economic substance and have focused instead on other doctrines such as sham transaction and substance over form. This may have implications for the strict liability penalty incorporated into the economic substance doctrine.