Positive Book-tax Differences Research Articles

The Effect of Book Tax Differences, Operational Cash Flow to Earnings Persistence

One of the crucial functions of financial reports is to serve as a basis for evaluating performance and representing the condition of financial performance in an organization or company. Accrual financial reports are prepared based on established standards based on accounting principles, while fiscal financial reports are reports prepared based on tax regulations and used by parties with an interest in the tax collection process. The difference in the value of profit in the financial statements after the fiscal reconciliation is carried out for tax purposes based on the provisions of the tax regulations is what gives rise to the term book tax differences in tax analysis. Earnings persistence is current period earnings which reflects earnings in future periods. This study aims to analyze the effect of Book Tax Differences, Operating Cash Flow and Accrued Profits on Profit Persistence in Manufacturing Companies listed on the Indonesia Stock Exchange. The research object for manufacturing companies listed on the IDX for 2017-2021 is with a sample of 10 manufacturing companies selected using the Purposive Sampling technique. The results showed that the higher the large positive book tax differences, the better the company's profit persistence, while for large negative book tax differences, the higher the large negative book tax differences, the lower the earnings persistence. The higher the company's operating cash flow, the higher the profit persistence. the higher the accrual profit, it will not affect the persistence of earnings.

The Effect of Tax Avoidance on Audit Costs

This research aims to analyze the impact of tax avoidance on audit fees in Indonesian Stock Exchange (IDX) companies in 2013-2015. This research used book-tax differences and book-tax conformity as a proxy for tax avoidance. The result of book-tax differences as a proxy of tax avoidance showed a significant effect on audit fees, indicating that the bigger the negative book-tax differences, the more the audit fees. On the other hand, the result of book-tax conformity as a proxy of tax avoidance showed that there is no significant effect on audit fees. Thus, book-tax differences is preferable to book-tax conformity as a proxy for tax avoidance. This research does a difference test of the impact of large book-tax differences and small book-tax differences on the audit fees as an additional analysis. The result showed that large book-tax differences is more significant than the other. This research also does a difference test of the impact of large positive book-tax differences and large negative book-tax differences on audit fees. It indicates no significant difference between the effect of large positive book-tax differences and large negative book-tax differences on audit fees.

Pengaruh Book Tax Differences Terhadap Kualitas Laba Pada Perusahaan Sektor Barang Konsumsi Di Indonesia

This research aimed to determine the effect of book tax differences to the quality of earnings on the next period in manufacturing companies in the customer goods industry sectors listed on the Indonesia Stock Exchange (BEI) from 2010 to 2013. The types of data used in this research was quantitative data methods with descriptive analysis testing, and statistical analysis was linear regression. The sampling methods used was purposive sampling. The result of this research indicate that large positive book tax differences is not significant effect on the quality of earnings. Companies with large positive book tax differences not shown to have lower persistence than firms with small book tax differences. Large negative book tax differences is significant effect on the quality or earnings. Companies with large negative book tax differences shown to have lower persistence than firms with small book tax difference

Honorários de auditoria e Book-Tax Differences

As diferenças entre o lucro contábil e o lucro tributável, denominadas internacionalmente de Book-Tax Differences (BTD), podem aumentar os riscos e esforços do auditor, elevando os honorários da auditoria. A pesquisa verifica se existe relação entre os tipos de BTD e os honorários de auditoria que foram pagos pelas companhias abertas brasileiras no período de 2010 a 2014. Diferente dos estudos internacionais, apenas a BTD positiva (lucro contábil maior que o lucro tributável) apresentou relação com os honorários. O maior gerenciamento de resultados e evasão fiscal, que geram a BTD positiva, historicamente presentes em países civil law, podem justificar essa diferença de resultados em relação a outros países em que os efeitos foram testados. A BTD positiva pode representar uma “bandeira vermelha” para auditores, investidores, analistas e reguladores avaliarem a qualidade das informações contábeis. Discute-se a relevância de aprofundar a análise de como os honorários de auditoria variam com os diversos tipos de BTD, em diferentes setores de atividade e origens legais de países.

MANAJEMEN LABA DAN PERENCANAAN PAJAK SEBAGAI SUMBER LARGE POSITIVE BOOK-TAX DIFFERENCES TERHADAP PERSISTENSI LABA

<p><em>This study replicates Blaylocket al. (2012). Through this research, the writer wanted to analyze the influence of earnings management and tax planning as source of Large Positive Book-Tax Differences (LPBTD) to earnings persistence. This research uses panel data of manufacturing companies listed on Indonesia Stock Exchange for the period of research year 2012-2013. The data is analyzed with Pooled Least Square. Unfortunately, the authors can not prove that earnings management as a source of LPBTD can weaken earnings persistence. The result of earnings persistence estimation is exactly the opposite. This condition may occur because the action of earnings management by managers is viewed in terms of efficiency contracting perspective. In addition, the authors also can not prove that tax planning as a source of LPBTD strengthens the profit persistence. According to Blaylock et al. (2012), this happens because the measurement of cash effective tax rate can not be reviewed only with period of 5 (five) years.</em></p><em>Keywords:Persistensi profit, profit management, tax planning, Large positive book-tax differences</em>

Analisis pengaruh perbedaan antara laba akuntansi dengan laba fiskal pada perusahaan dagang terhadap pertumbuhan laba, akrual dan harga saham

This study investigates the role of book-tax differences in indicating the growth of earnings, accruals and investor expectation that reflected in stock price for one period ahead earnings. The methods of research that used in is pooled regression and the technic that used in is purposive sampling, i.e. the choice of sample is being selected by researcher. Using the earnings data of 26 (twenty six) trading companies from the year 2004-2007, the results showed that firm years with large positive (negative) book-tax differences (book income in excess of taxable income) have earnings that are higher than firm years with small book-taxes differences. Furthermore, there are no effect between accruals and investor expectation that reflected in stock price with one period ahead earnings. This study has limitations. One of its is the number of sample is relative short and the sample is not random. The other is the period of study is relative short, only 4 years.

Pengaruh Book Tax Differences dan Struktur Kepemilikan Saham terhadap Persistensi Laba

The aim of this study is to get empirical evidence about the influence of book tax differences (BTD) and managerial ownership to earnings persistence. BTD is separated into normal BTD and abnormal BTD, and classified into positive BTD and negative BTD. There are four components that are tested in BTD, namely large positive abnormal BTD (LPABTD), large negative abnormal BTD (LNABTD), large positive normal BTD (LPNBTD), and large negative normal BTD (LNNBTD). The ownership structure that tested is managerial ownership. This research uses multiple linear regression analysis with population of manufacturing companies in Indonesia Stock Exchange. The result shows that companies with LPABTD, LNABTD, and LPNBTD have higher earnings persistence than companies without the components. Conversely, companies with LNNBTD have lower earnings persistence than companies without the components. The structure of managerial stock ownership increases the earnings persistence unless the companies have large negative normal BTD. Key words: book tax differences, earnings persistence, managerial ownership, tax planning

Trends in the Sources of Permanent and Temporary Book-Tax Differences During the Schedule M-3 Era

We use a time-series of macro-economic Schedule M-3 tax return data from Subchapter C corporations to provide descriptive evidence on specific sources of permanent and temporary book-tax differences from 2004 to 2013. Our primary findings are that 1) total book-tax differences increase, fueled by increases in both positive and negative temporary and permanent book-tax differences; 2) firms’ operations and financing, as well as economic incentives, explain a substantial amount of book-tax differences; 3) firms report a substantial but decreasing amount of book-tax differences in the “other” categories throughout the sample period; 4) the frequency and magnitude of reportable transactions decreases significantly; and 5) foreign operations continue to provide an increasing source of earnings for firms, while the amount repatriated and subjected to U.S. income taxes is likewise growing. However, the relative amount of foreign earnings repatriated decreases substantially after 2009.

Does accounting for uncertain tax benefits provide information about the relation between book-tax differences and earnings persistence?

Purpose – This study aims to use research setting provided by the implementation of Financial Accounting Standards Board Interpretation 48 (FIN48) to help develop a further understanding of large positive book–tax differences (LPBTD) and their relationship with earnings persistence. Extant literature indicates that the tax information provided in financial statements, such as large book–tax differences, is useful for detecting earnings management and signals less persistent future earnings. However, more information is needed about the causes of large book–tax differences and their abilities to signal the differences in earnings persistence (Blaylock et al., 2012). Design/methodology/approach – In the first step, temporary book–tax differences are ranked by quintiles based on the approach in Hanlon’s (2005) study and the highest quintile in the sample observations are designated as large positive temporary book–tax differences (LPBTD). In the second step, differences in the persistence of earnings for high tax-planning firms as measured by UTB_NonETR are searched for. In further testing, an ordered logistic model and the Vuong (1989) test are applied to compare both the incremental and the relative ability of UTB_NonETR and Cash-ETR to explain the ranking order of temporary book–tax differences. Findings – The negative relation between temporary differences and earnings persistence is moderated by the level of tax planning as measured by UTB_NonETRs. More specifically, the persistence of earnings appears to be higher for firm-years with large UTB_NonETRs. When comparing the relative power of UTB_NonETR with Cash-ETR, the results indicate that UTB_NonETR is incrementally useful for explaining the ranking orders of temporary book–tax differences. However, it appears that neither UTB_NonETR nor Cash-ETR is relatively more useful over another under the Vuong (1989) test. Originality/value – First, the part of UTB, if recognized, that would not affect earnings (UTB_NonETR) is used as an empirical proxy and its usefulness is tested in the context of book–tax differences and the persistence of earnings. Second, new evidence is provided supporting the predictions, as in Ayers’ et al. (2010) and Blaylock et al.’s (2012) studies, that the level of tax planning will attenuate the negative association between large book–tax differences and earnings quality. Third, the findings can contribute to the post-implementation review of FIN48 (Financial Accounting Foundation, 2012) supporting the argument that FIN48 can provide decision-useful information for financial statement users.

PENGARUH PERBEDAAN LABA AKUNTANSI DAN LABA PAJAK TERHADAP MANAJEMEN LABA DAN PERSISTENSI LABA

This study was conducted to examine the effect of book tax-differences in indicating the earnings persistence by first testing whether the listed companies manage their earnings to avoid losses. The number of samples used in this study is 79 firms to examine earnings management, and 26 firms to examine earnings persistance.The results show that samples manage their earnings to avoid losses. In addition, it is evident that the deferred tax expense and accruals jointly influence positively on the probability the company do earnings management. Partially large book-tax differences, operating cash flow, earnings and profit effect significantly on earnings persistence. The results also show that companies with large positive-book tax differences are shown to have lower earnings persistence than firms with small book tax differences. Moreover, companies with large positive book-tax differences show that the persistence od accruals for future earnings is lower than small firms with positive book-tax differences.

Tax Avoidance, Large Positive Temporary Book-Tax Differences, and Earnings Persistence

ABSTRACTWe investigate why temporary book-tax differences appear to serve as a useful signal of earnings persistence (Hanlon 2005). We first test and show that temporary book-tax differences provide incremental information over the magnitude of accruals for the persistence of earnings and accruals. We then opine that there are multiple potential sources of large positive book-tax differences. We predict and find that firms with large positive book-tax differences likely arising from upward earnings management (tax avoidance) exhibit lower (higher) earnings and accruals persistence than do other firms with large positive book-tax differences. Finally, we find significant variation in current-period earnings and accruals response coefficients and insignificant hedge returns in period t+1, consistent with investors being able to look through to the source of large positive book-tax differences (earnings management and tax avoidance), allowing them to correctly price the persistence of accruals for these subsamples.Data Availability: Data are available from public sources identified in the study.

Tax Avoidance, Large Positive Book-Tax Differences and Earnings Persistence

We investigate why book-tax temporary differences appear to serve as a useful signal of earnings persistence. We maintain that there are multiple potential sources of large positive book-tax differences and examine the differing implications of large positive book-tax differences for earnings and accruals persistence depending on the source of those differences. We expect and observe that firms with large positive book-tax differences likely arising from tax avoidance exhibit greater accruals persistence than other firms with large positive book-tax differences. We also expect and observe that firms with large positive book-tax differences likely arising from upward earnings management exhibit lower earnings and accruals persistence than other firms with large positive book-tax differences. Further, we provide evidence that investors are able to look through to the source of large positive book-tax differences allowing them to correctly price the persistence of accruals. Together, our results illustrate the importance of considering the source of book-tax differences when using them as a signal of earnings quality.

Conservatism and Book-Tax Differences

I investigate the relation between conservatism and book-tax differences (BTDs), where “conservatism” refers to conservatism in the financial statement context (as opposed to the taxable income context). Specifically, “conservatism” refers to conditional and unconditional conservatism per Basu (1997). The primary objective of my study is to further the use of BTDs in financial statement analysis. I find that, on average, the conditional and unconditional financial statement conservatism of firm-years with large positive BTDs (book income is greater than taxable income) is similar to that of other sample firm-years, while the conditional and unconditional conservatism in taxable income of firm-years with large positive BTDs is greater than that of other sample firm-years. Thus, contrary to teachings in popular accounting textbooks, my main findings suggest that large positive BTDs do not, on average, reveal information about a firm's relative level of financial statement conservatism. I additionally find that, on average, the unconditional financial statement conservatism among firm-years with large negative BTDs (LNBTDs, taxable income is greater than book income) is greater than that of other sample firm-years, and, at the same time, the conditional and unconditional conservatism in taxable income among firm-years with large negative BTDs is less than that of other sample firm-years. Because the increased financial statement conservatism among firm-years with LNBTDs is unconditional in nature, and is not conditional in nature, the increased conservatism among firm-years in this subsample does not translate into higher earnings quality.

The Persistence and Pricing of Earnings, Accruals, and Cash Flows When Firms Have Large Book-Tax Differences

I investigate the role of book-tax differences in indicating the persistence of earnings, accruals, and cash flows for one-period-ahead earnings. I also examine whether the level of book-tax differences influences investors' assessments of future earnings persistence. I find that firm-years with large book-tax differences have earnings that are less persistent than firm-years with small book-tax differences. Further, the evidence is consistent with investors interpreting large positive book-tax differences (book income greater than taxable income) as a “red flag” and reducing their expectation of future earnings persistence for these firm-years. I then investigate potential sources of the lower persistence for firm-years with large book-tax differences. I find that special items contribute in part to the results but that firm-years with large booktax differences continue to have lower persistence in earnings after controlling for the effect of the special items.

The Persistence and Pricing of Earnings, Accruals, and Cash Flows When Firms Have Large Book-Tax Differences

I investigate the role of book-tax differences in indicating the persistence of earnings, accruals and cash flows for one-period-ahead earnings. I also examine whether the level of book-tax differences influences investors' assessments of future earnings persistence. I find that firm-years with large book-tax differences have earnings which are less persistent than firm-years with small book-tax differences. Further, the evidence is consistent with investors interpreting large positive book-tax differences (book income greater than taxable income) as a red flag and reducing their expectation of future earnings persistence for these firm-years. However, for firm-years with large negative book-tax differences (book income less than taxable income), investors overestimate the persistence of the accrual component of earnings, consistent with prior research (e.g., Sloan 1996). Finally, analyst forecast data provide evidence consistent with analysts utilizing the information in the book-tax differences in a manner similar to investors: forecast errors for firm-years that have large positive book-tax differences are less optimistic.