scholarly journals Transfer Pricing and Controlled Transactions in Connection with Earnings Management and Tax Avoidance

2021 ◽  
Vol 92 ◽  
pp. 02031
Author(s):  
Katarina Kramarova
Keyword(s):  
Earnings Management ◽  
Income Tax ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Value Added ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Detection Capability ◽  
Related Party Transactions ◽  
Business Entities

Research background: The way of pricing intra-group transactions (controlled transactions in the terms of transfer pricing) should be in line with the arm´s length principle, whether we consider nationally or transnationally related business entities. If this is not the case, these operations are a tool for earnings management between the companies. It is known that income tax is perceived by businesses as an unproductive withdrawal of own funds without obvious consideration, and therefore managing economic transactions at the level of related-party entities in order to minimize the tax liability is obvious and even expected. Purpose of the article: The aim of the paper is to find out if controlled transactions are used in connection with earnings management and tax avoidance in the selected Slovak company using proxies, which may carry this detection capability (ratios of related party transactions, book-tax differences ratio, and discretionary accruals ratio). Methods: The analytical part of the paper follows the Slovak transfer pricing legislation in force. Following the existing research studies, we test hypothetical relationship between the indicators of earnings management, related party transactions and tax avoidance by applying correlation analysis. We worked mainly with publicly available data from financial statements and notes to financial statements. Findings & Value added: The results indicate that the company managed earnings rather downwards, since the values of discretionary accruals ratio were negative. On the other side, it was not proven that earnings management was carried out purely with the intention of minimizing tax liability.

scholarly journals The credibility of earnings announced by new stock companies: accrual and real earnings management

Equilibrium ◽  
2021 ◽  
Vol 16 (3) ◽  
pp. 661-677
Author(s):  
Tomasz Sosnowski
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
Financial Reporting ◽  
Value Added ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Production Costs ◽  
Real Earnings Management ◽  
The Impact

Research background: An initial public offering (IPO) creates an excellent opportunity to research the impact of changes in the institutional environment of companies on the trustworthiness of the information disclosed in financial statements. Purpose of the article: The main aim of the study is to analyze the use of accrual and real earnings management to inflate earnings, revenue, or total assets around the going public event. Therefore, this paper contributes to the stream of study on the quality of financial reporting of new stock companies. Methods: Two main approaches reflect the use of various types of earnings management activities, i.e., discretionary accruals and real earnings management. In both cases, it was necessary to use proper OLS method estimated models to identify the normal level of categories that affect the results reported in financial statements. Findings & value added: Based on a sample of 183 IPOs from the Warsaw Stock Exchange between 2005 and 2015, generally, managers of newly-listed companies actively use discretionary accruals, reduce production costs and certain discretionary expenses, and abnormal cash flows from operations ? i.e., all proxies of earnings management used in the paper ? in the periods around the IPO. In the period prior to the IPO, managers more often introduce techniques typical of the real sphere of the company's operations, in particular, the deliberate modeling of certain discretionary costs. In turn, the use of discretionary accruals dominates in the year after the IPO.

scholarly journals Earnings management and income tax evidence from Greece

2015 ◽  
Vol 12 (2) ◽  
pp. 511-529 ◽  
Author(s):  
Eftychia Kapoutsou ◽  
Christos Tzovas ◽  
Constantinos Chalevas
Keyword(s):  
Earnings Management ◽  
Significant Relationship ◽  
Income Tax ◽  
Management Practices ◽  
Management Accounting ◽  
Discretionary Accruals ◽  
Earning Management ◽  
Total Current ◽  
Jones Model ◽  
Deferred Tax

The aim of this study is to examine the question of earnings management and, specifically, how this relates to taxation. In order to determine whether there is a correlation between earnings management and taxation, we investigate the discretionary accruals aspect of total accruals, i.e. the portion of profits which can be affected by management accounting choices, as calculated by the Jones (1991) model and the modified Jones model (Dechow et. al, 1995). Furthermore, we examine to what degree a correlation may exist between discretionary accruals and tax income (consisting of current and deferred tax). Our empirical findings demonstrate a statistically significant relationship between the levels of discretionary accruals and of total, current and deferred tax. This suggests that tax in general may be employed as a means to facilitate earnings management. The findings of this study suggest that IFRS provisions regarding taxation provide firms with a scope to get involved in earning management practices

scholarly journals DETERMINASI PENGUNGKAPAN TRANSAKSI PIHAK BERELASI BERDASARKAN PSAK NO.7 TAHUN 2018

2020 ◽  
Vol 6 (1) ◽  
pp. Press
Author(s):  
Jessyka Tridewi Purba ◽  
Husnah Nur Laela Ermaya ◽  
Ayunita Ajengtiyas
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Stock Exchange ◽  
Manufacturing Sector ◽  
Secondary Data ◽  
Sampling Technique ◽  
Institutional Ownership ◽  
Financial Statements ◽  
Managerial Ownership ◽  
Related Party Transactions

This study aims to examine the effect of Audit Committee, Independent Commissioner, Institutional Ownership, Managerial Ownership, Earnings Management to Related Party Transaction Disclosure. This type of research is quantitative reseacrh using secondary data of financial statements from manufacturing sector companies during 2016 to 2018 obtained from Indonesia Stock Exchange. The sampling technique that used is purposive sampling. The results showed that the Audit Committee, Independent Commissioners, Institutional Ownership, Managerial Ownership and Profit Management were able to influence the disclosure of related party transactions by 13%, while the remaining 87% were influenced by other variables outside this study. Partially, institutional ownership and managerial ownership significantly influence the disclosure of related party transactions. While the audit committee, independent commissioners and earnings management do not affect the disclosure of related party transactions.

scholarly journals PRAKTIK EARNING MANAGEMENT DAN PENGARUHNYA TERHADAP KOMPENSASI BONUS

2020 ◽  
Vol 3 (1) ◽  
pp. 100
Author(s):  
Siti Zubaidah
Keyword(s):  
Panel Data ◽  
Earnings Management ◽  
Management Practices ◽  
Hypothesis Test ◽  
Financial Statements ◽  
Test Method ◽  
Earning Management ◽  
Business Unit ◽  
Business Units ◽  
Business Entities

The purpose of this study is to identify earning management practices and analyze the effect of earnings management on bonus compensation. The object of research uses the Business Entity and Sharia Business Unit. The selected sample is 34 companies. Variables used are earnings management and bonus compensation. Data is collected through documentation in the form of financial statements of Business Entities and Sharia Business Units in 2017 and 2018. This study uses a hypothesis test. The test method used is panel data test using EViews 10 software. The results showed that the practice of earning management in Sharia Business Entities and Business Units is mostly done by income maximalization or increasing profit (50%) and income minimizasion or decreasing profit (50%), and there is a significant influence between earning management practices and bonus compensation.

scholarly journals INFLUENCE OF TRANSFER PRICES ON TAX EVASION

2021 ◽  
Vol 21 (1) ◽  
Author(s):  
Vedran Šupuković
Keyword(s):  
Tax Evasion ◽  
Transfer Pricing ◽  
Market Price ◽  
Value Added ◽  
Tax Base ◽  
Tax Rate ◽  
Objective Evidence ◽  
Transfer Prices ◽  
The Subject ◽  
Business Entities

In recent years, transfer (internal) prices have become the subject of interest of many theorists and regulators, both for determining their effects on business and for the possibility of exploiting tax evasion. The foundations for the functioning of transfer pricing are given in the OECD guidelines, and further elaborated through national tax laws and regulations for their application. This regulatory framework treats all relevant entities, circumstances and conditions of transfer pricing, identification and explanation of transfer pricing methodology, and providing objective evidence on the application of the principle of independence and setting other conditions in transactions between related companies, all in order to prevent tax evasion and proven application of legal regulations in the field of transfer pricing. Since transfer prices are linked to decentralized related business entities consisting of parent companies and branches (organizational units or centers of responsibility) operating in the same or another country, tax evasion is done through the transfer of profits from a country with a high tax burden to a country with a lower tax rate. In addition, tax evasion is performed by reducing the tax base for value added tax, which is the difference between the transfer (non-market) price and the market price. Transfer price is formed using methods that are classified into two groups: classical transaction methods or transaction profit methods. Which method will be applied from these two groups depends on the adopted policy of the business entity. In principle, methods that are in line with the nature of the business of the business entity and that can determine the tax base in the most objective way should prevail. In practice, a method is chosen that results in maximizing profits and minimizing tax liabilities, which further leads to a better competitive position of the business entity, improvement of market position and increase of market shares. The subject of observation are all transactions between related parties on the basis of direct and indirect agreements, contracts, agreements and similar business relationships that affect the tax base, namely transactions with assets, services, financial transactions, capital transactions (purchase and sale of securities and shares ) and other similar transactions. The purpose of this paper is to investigate whether transfer prices are in line with the principle of marketability, regardless of the applied calculation method. The aim of this paper is to eliminate all possibilities of tax evasion in transactions between the parent company and subsidiaries within the group. In order to achieve the stated goal and purpose, the basic hypothesis of the work is set, which states that the application of different methods of calculating transfer prices affects the amount of the tax base. Proof of this hypothesis will be done on a case study example. The obtained results can serve as a basis for the commitment of the business entity for the appropriate method of calculating transfer prices. This excludes the individual goals of the business entity and the primacy given to one of the basic goals of taxation: achieving efficiency and fairness.

scholarly journals Tariff elimination versus tax avoidance: free trade agreements and transfer pricing

2021 ◽  
Author(s):  
Hiroshi Mukunoki ◽  
Hirofumi Okoshi
Keyword(s):  
Free Trade ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Free Trade Agreements ◽  
Value Added ◽  
Trade Agreement ◽  
Rules Of Origin ◽  
A Value ◽  
Transfer Prices

AbstractWe explore the new roles of rules of origin (ROO) when multinational enterprises (MNEs) manipulate their transfer prices to avoid a high corporate tax. The ROO under a free trade agreement (FTA) require exporters to identify the origin of exports to be eligible for a preferential tariff rate. We find that a value-added criterion of ROO restricts abusive transfer pricing by MNEs. Interestingly, an FTA with ROO can induce MNEs to shift profits from a low- to high-tax country. Because the ROO augment tax revenues inside FTA countries, they can transform a welfare-reducing FTA into a welfare-improving one.

scholarly journals Analisis Manajemen Laba Perbankan Konvensional dan Perbankan Syariah di Bursa Efek Indonesia

2020 ◽  
Vol 3 (1) ◽  
pp. 93
Author(s):  
Esty Apridasari
Keyword(s):  
Earnings Management ◽  
Agency Theory ◽  
Conflicts Of Interest ◽  
Stock Exchange ◽  
Financial Statements ◽  
Descriptive Study ◽  
Discretionary Accruals ◽  
Islamic Banks ◽  
Absolute Value ◽  
Conventional Banks

<p class="bdabstract">Earnings management in financial statements can be caused by accrual accounting policies applied and conflicts of interest in agency theory. This study aims to analyze and compare earnings management in financial statements of conventional banks and Islamic banks. This research is a descriptive study of banks listed on the Indonesia Stock Exchange in 2017-2018. Earnings management is measured by accrual earnings management proxied by discretionary accruals using the modified-Jones model. The samples are 10 Islamic banks and 32 conventional banks. The results show that the comparison of the average absolute value of discretionary accruals for conventional banks is 0.0659 and for Islamic banks is 0.0478. It shows that discretionary accruals for Islamic banks are generally smaller compared to conventional banks. This indicates that the level of earnings management in Islamic bank financial statements is lower than conventional banks.</p>

scholarly journals PENGARUH MANAJEMEN LABA DAN CORPORATE GOVERNANCE TERHADAP KECURANGAN LAPORAN KEUANGAN

2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Alam Ashari Kurniawan ◽  
Linda Y. Hutadjulu ◽  
Aaron M. A Simanjuntak
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Sampling Method ◽  
Stock Exchange ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Audit Committees ◽  
Managerial Ownership ◽  
Fraudulent Financial Statements ◽  
Independent Audit

This study aims to analyze the influence of earnings management and corporate governance on fraudulent financial statements. This research was conducted again to review the influence of earnings management and corporate governance on fraud. The population in this study is amanufacturing company listed on the Indonesian stock exchange. Based on the purposive sampling method obtained by 50 companies. The number ofobservations is 150 observations. The analysis used is logistic regression. The results in this study indicate that earnings management as measured by discretionary accruals and unexpected revenue per employee proves that there is no influence onfraudulent financial statements. Corporate governance as measured by managerial ownership, institutional ownership, board of commissioners, independent commissioners, independent audit committees does not affect on fraudulent financial statements.

Sign in / Sign up

Export Citation Format

Share Document