Economic determinants of an intraperiod accounting policy choice for tax effect accounting

Grice, Ian R. (1991). Economic determinants of an intraperiod accounting policy choice for tax effect accounting Honours Thesis, School of Business, The University of Queensland.

       
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Author Grice, Ian R.
Thesis Title Economic determinants of an intraperiod accounting policy choice for tax effect accounting
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 1991
Thesis type Honours Thesis
Total pages 116
Language eng
Subjects 14 Economics
Formatted abstract This study examines the effects of political and debt contracting costs on an intraperiod accounting choice. Due to the broad definition of 'extraordinary items' in Statement of Accounting Standards - Profit and Loss Statements (AAS1) in 1988, Australian companies at this time retained a discretionary choice as to the intraperiod classification of gains or losses arising from changes in the company tax rate. These could be classified as either extraordinary or operating items. Hypotheses are formulated from an opportunistic perspective regarding the economic determinants of this discretionary choice. Hypotheses are also constructed to examine the determinants of firms' early or late adoption of 1989 changes to the definition of extraordinary items.

While the results do not support the economic determinants studied in the context of early or late adoption, incentives provided by political sensitivity and debt constraints are consistently supported as determinants of the voluntary intraperiod classification choice. Although the results are mixed, they generally provide further evidence in support of previous studies in positive accounting theory.

A principal objective of this thesis is the development and testing of new constructs for political costs that are more closely tied to the Australian Institutional Environment at the time of the study. This is motivated by a recent review of positive accounting literature by Watts and Zimmerman (1990). The study is successful in finding significance for a number of previously untested political sensitivity constructs, although some cautions are noted regarding the placement of reliance in these results.


 
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