Financial Reporting, Tax Costs, and Book-Tax Conformity

Posted: 27 Jun 1998

See all articles by David A. Guenther

David A. Guenther

University of Oregon - Department of Accounting

Edward L. Maydew

University of North Carolina at Chapel Hill

Sarah E. Nutter

George Mason University - Department of Accounting

Date Written: March 1996

Abstract

We investigate the role of book-tax conformity in firms' financial reporting activities using a unique set of publicly traded firms that were forced to switch for tax purposes from the cash method to the accrual method. Prior to the mandated change, little tension existed between tax planning and financial reporting goals for these firms. After the change, recognition criteria for tax and financial reporting purposes became more alike, increasing the tension between financial reporting and tax objectives. Our results suggest that required use of the accrual method for tax purposes causes firms to slow their income recognition for financial statement purposes.

JEL Classification: M41

Suggested Citation

Guenther, David A. and Maydew, Edward L. and Nutter, Sarah E., Financial Reporting, Tax Costs, and Book-Tax Conformity (March 1996). Available at SSRN: https://ssrn.com/abstract=2631

David A. Guenther

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5384 (Phone)

Edward L. Maydew (Contact Author)

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Sarah E. Nutter

George Mason University - Department of Accounting ( email )

4400 University Drive
School of Management
Fairfax, VA
United States
703-993-1860 (Phone)
703-993-1809 (Fax)

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