Accounting for Income Taxes: Primer, Extant Research, and Future Directions

175 Pages Posted: 23 May 2013

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Jana Smith Raedy

University of North Carolina at Chapel Hill

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

Date Written: 2012

Abstract

This paper comprehensively reviews the Accounting for Income Taxes (AFIT) literature. We begin by identifying four distinctive aspects of AFIT. We cover the rules surrounding AFIT and provide a discussion of the descriptive studies related to AFIT. We then review the existing research studies in detail and offer suggestions for future research. We focus on the two research questions that have been most widely studied (the extent to which managers use the tax accounts to manipulate earnings and whether equity market participants price the tax accounts). We discuss econometric issues that apply to AFIT and more broadly apply to much accounting and economics research. We also highlight areas that have not received much research attention and that warrant future analysis.

Keywords: financial reporting, tax accounts, book-tax differences, earnings management

JEL Classification: M41, H20

Suggested Citation

Graham, John Robert and Smith Raedy, Jana and Shackelford, Douglas A., Accounting for Income Taxes: Primer, Extant Research, and Future Directions (2012). Foundations and Trends in Finance, Vol. 7, Nos. 1-2, 2012. Available at SSRN: https://ssrn.com/abstract=2268602

John Robert Graham (Contact Author)

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Jana Smith Raedy

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-7475 (Phone)
919-962-4727 (Fax)

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3197 (Phone)
919-962-4727 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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