How Firms Avoid Losses Use of Net Dta

In: Business and Management

Submitted By elyselui
Words 12659
Pages 51
How Firms Avoid Losses: Evidence of Use of the Net Deferred Tax Asset Account
David Burgstahler* University of Washington Gerhard G. Mueller Endowed Professor in Accounting

W. Brooke Elliott University of Washington Michelle Hanlon University of Michigan Business School
November 26, 2002

_________________________________________________________________________________ ABSTRACT: This paper investigates whether firms use discretion in accounting for deferred taxes to increase earnings and avoid reporting a loss. We find that firm-years with small scaled profits reduce (relative to the prior year) the proportion of the gross deferred tax asset reserved by the valuation allowance more than firm-years with small scaled losses. We find no evidence that the firm-years that have seemingly moved from having a small scaled loss to a small scaled profit using changes in the net deferred tax asset have greater expected future taxable income to support this change under SFAS 109. Our results also suggest that firms that increase earnings through the net deferred tax asset have relatively lower costs to managing earnings to avoid a loss, that is, these firms have a smaller pre-managed loss. ______________________________________________________________________________

*Corresponding author: David Burgstahler, (206) 543-6316, dburg@u.washington.edu.
We are grateful for helpful comments from Bob Bowen, Frank Hodge, Kathryn Kadous, Shiva Rajgopal and Terry Shevlin and workshop participants at the University of Washington and the 2002 UBCOW conference. We would also like to thank Corey Murata for his assistance in the data collection process.

1.

Introduction Since its introduction in 1992, Statement of Financial Accounting Standard No. 109

Accounting for Income Taxes (SFAS 109) has been controversial. Unlike previous statements, e.g., SFAS No. 96 and Accounting…...

Similar Documents

How to Avoid Getting Lost

...hinsonyl@wfu.edu Course Description and Requirements The purpose of this course is to introduce you to the concepts, vocabulary and uses of Financial Accounting. As we proceed, we will adopt several different points of view. ← We will take the perspective of preparers of financial information. Preparers include accountants who work for companies that must produce Financial Statements on a regular basis and file them with the various regulatory authorities, such as the Securities and Exchange Commission (SEC). These accountants may include the Chief Financial Officer, who, along with the Chief Executive Officer, is responsible for the Financial Statements. We will learn procedures and rules about how financial events are recognized and disclosed. ← We will take the perspective of independent auditors and regulators, who oversee the financial information that companies disseminate. Independent auditors work for an accounting firm and are hired to audit financial statements before these reports are filed with the SEC. Audit firms include PricewaterhouseCoopers, KPMG, Ernst and Young, and Deloitte and Touche (which collectively are called the “Big 4”) and a host of smaller, regional firms. All firms with stock that is traded on an exchange, such as the New York Stock Exchange, must have their statements audited by an independent audit firm. Auditors and regulators are confronted with the critical task of being an intermediary between preparers of......

Words: 1980 - Pages: 8

How to Avoid Middle Income Traps

...of this paper is to examine prior patterns of growth in Malaysia, document the cross-country evidence of how Malaysia compares with peer countries from a variety of perspectives, and highlight various policies to promote more rapid growth in the future. To avoid the Middle Income Trap, it is critical for a country to sustain high rates of economic growth. This task is complicated by the fact that the transformation of Asian economies from rural to urban-based is expected to take place within 50 years, while this transformation took over 100 years in advanced economies (see Aizenman et al. 2012). The economic transitions are occurring much more rapidly than those in the past (see Felipe, 2012).3 Recent evidence also finds that Malaysia, the Philippines and China will face a larger risk ofgrowth slowdown stemming from institutions; while Vietnam, India, and Indonesia are most at risk of a slowdown arising from a lack of transport and communications infrastructure (see Aiyer et al. 2013). Previous studies of growth slowdowns in fast-growing middle-income countries identify two modes of slowdowns: one in the $10,000-$11,000 range and another at $15,000 - $16,000 (see Eichengreen et al. 2012 and 2013). A growth slowdown is less likely to occur in countries with more diversified economic production accompanied by a skilled population set and high-technology production to avoid the middle-income trap (see Aiyer et al. 2013 and Eichengreen et al. 2013). 4...

Words: 540 - Pages: 3

How to Use Qtp

...QUICK TEST PROFESSIONAL 11 Table of Contents 1 Session 1 INTRODUCTION TO QTP 9.5 3 1.1 Introduction 3 1.2 Add-ins in 9.5 3 1.3 Use of Addins 3 1.4 Add-in Manager 4 1.5 Benefits of Automated Testing: 4 1.6 The 7 phases of QTP 5 1.6.1 Preparing to record 5 1.6.2 Recording a session on your application 5 1.6.3 Enhancing your test 6 1.6.4 Debugging your test 6 1.6.5 Running your test 6 1.6.6 Analysing the test results 6 1.6.7 Reporting defects 6 1.7 QTP Main Window 7 2 Recording Modes and Run Modes 11 2.1 Major steps before scripting 11 2.2 Exercise 11 2.3 Recording Modes 12 2.3.1 Normal 12 2.3.2 Analog 12 2.3.3 Low Level 14 2.4 Run Modes / Execution Modes / Playback Modes 15 2.4.1 Run Mode 15 2.4.2 Maintenance Run Mode 15 2.4.3 Update Mode 16 3 Session 3 17 3.1 Introduction 17 3.2 Object Repository Types 17 3.2.1 Local Object Repository 17 3.2.2 Shared Object Repository 18 3.2.3 How to associate Shared Repository 19 3.3 Object Repository Window 19 3.4 Exporting Local Objects to an Object Repository 20 3.5 Managing Shared Object Repository Associations: 20 3.6 Object Repository Manager 21 3.6.1 Performing Merge Operations 22 4 Section 4: SYNCHRONISING YOUR TEST 25 4.1 Synchronisation Options 25 4.1.1 Modifying Timeout Values 25 4.1.2 Adding Exist and Wait Statements 25 4.1.3 Creating Synchronisation Points 25 4.2 Exercise 26 4.2.1 Using Wait......

Words: 7929 - Pages: 32

Plagiarism: What It Is, and How to Avoid It

...Plagiarism: What it is, and How to Avoid It By: Dr. Colin H. Gordon, Prof. Peter Simmons, Dr. Graeme Wynn, The Faculty of Arts, The University of British Columbia Executive Summary This summary defines the essence of plagiarism and the different aspects of it, points out the severity of the consequences it may lead to, and gives recommendations on ways to avoid it. What is plagiarism? Plagiarism is intellectual theft; it is considered a serious academic offence, which may lead to grave repercussions on students’ academic history, to suspension, or even expulsion from University. What are the types of plagiarism? Plagiarism can be found in various forms: - complete plagiarism - whole works being stolen; - near-complete plagiarism - using portions of another text as own; - patchwork plagiarism - patching together ideas and phrases from different sources; - lazy plagiarism - appropriating others’ language accidentally due to sloppy research; - self plagiarism - using or adapting one’s own work written for another purpose. What are the ways to avoid plagiarism? The boundaries between original work and plagiarism could sometimes be blurred; students should avoid any traps simply by maintaining good research habits and following the basic rules of writing and documentation; distinguish......

Words: 255 - Pages: 2

How to Avoid Professional Misconduct

...Human Resource Management Article Yuri Caicedo How to Avoid Professional Misconduct Professional misconducts might happen when you don’t expect it. For instance, a child could be physical abused by a teacher. Professionals such as teachers, engineers, doctors, lawyers, architects, barbers, and veterinarians need to get licenses to work in their fields, in which you can find codes of professional conduct. To be license you need to register with the state you practice in and meet the standards for that profession. The codes of professional conduct are rooted in ethics. These ethics are values, and what differentiate the right and wrong action. Many companies don’t require employees with licenses but these companies have their own set of codes of conduct or ethics, and they make their employees to follow. These codes of conduct were made to prevent public from irresponsible professionals. In certain professions there are codes of conduct with different rules. However, the majority of professions have the codes of conduct with similar rules. An item normally found in the code of conduct is the gross of negligence or gross of incompetence, which means that are professional does not have basic ability to work. The majority of the professional need to take an exam to demonstrate that they know about all the aspects of their job. Additionally professionals need to take renew their licenses regularly. Therefore, they can keep learning and keep up to date with industry changes.......

Words: 669 - Pages: 3

How to Avoid

...How to Avoid Submitting a Paper Detailed description of a problem or an opportunity. Project Charter refers to a statement of objectives in a project. The Enterprise Service Management Reporting project intends to plan, design, construct and implement a structured data warehouse environment that will include data from ServiceNow. Survey with recommendations to determine the amount and cost of computersupport. Survey with recommendations to determine the amount and cost of computersupport. Functional managerswill provide team members for the project duration and they will be 100%dedicated to the project. Serves as the primary sales document for the project - Our Carry Curve™ handle makes for comfortable transport between the car and wherever you need to go! Our Carry Curve™ handle makes for comfortable transport between the car and wherever you need to go! To answer your post more specifically, it depends if you think beats are half decent. Or more pointedly half decent in comparison to apples current white head phones which comparatively it would be a yes. BUT I think the point your friends were making, being that it's a conversation in a public place, is that it could have been WAY better if apple kept to developing their own product. They could have definitely been MORE than half decent, for that much $$ they could have made something even better than beats. That's all. :) i react with “that fucking cat!!!” but I’m starting to wonder if I should be saying......

Words: 1077 - Pages: 5

How Plants Avoid Sunburn

... PLANTS AVOID SUNBURN    In chapter 5, we learned about one of the most important roles in plants, which is photosynthesis. Photosynthesis is the process by which plants,algae, and some microorganisms harness solar energy and convert it into chemical energy, this is done through pigments in plant cells. These pigments have distinct colors because some absorb more wavelengths then others. For example, carotenoids, these accessoery pigments reflect longer wavelengths of light, making them appear red, orange,or yellow. Carotenoids perform two major functions in the process of photosynthesis. One purpose is to serve as excessory light pigment and the other purpose to serve is to protect the pigments from the photo distructive reaction of oxygen.  There was a couple articles breaking down this process. I found a popular article published July 19, 2006 that has no author but the source was Arizona State University. This same institution offered a scientific article written by Iris Visoly-Fisher, Kayvon Daie, Yuichi Terazono, Christian Herrero, Fernando Fango Luis Oterom Edgardo Durantini, Juana J. Silber, Leonides Sereno, Devens Gust, Thomas A. Moore, Ana L. Moore, and Stuart M. Lindsay published in June 6, 2006. This article was most likely written for scientists or college grads majoring In the field because it was more into depth and was pubished on www.pnas.org[->0]. While the popular article is mostly intended for high school or junior high students as its published on......

Words: 1406 - Pages: 6

How Apple Use Pr for Its Strategy

...the richest, powerful and famous around the world. However, Apple Inc. should be aware that there are very strong competitors to drop it. Hence, the apple must respond to several issues such as labor issues. Public opinion is a collection of various opinions by many persons which opinions are combined and viewed from different angles every person (Britannica 2013). Public opinion also has become a belief then became a habit for all the people in their lives. With public opinion, everyone can act carefully when he or she wants to perform an action that has a lot of risk or less. Public opinion, which Apple Inc. has obtained, is the opinion that contains a negative opinion. As one of the leading companies today, it should be investigated how Apple Inc. could get benefit such a way (Forbes 2013). Apple Inc. got a great benefit because it gives small salaries to employees and also due to the low tax. Therefore, this led to many deaths experienced by the workers because workers are considered a spinning wheel on a machine. Other than that, Apple Inc. is also working with Chinese companies, which is Foxconn (Agnello 2012). It is a company that Apple Inc. trusted and worked together in order to open a new branch in China with rent and taxes are cheap so the cost incurred by the Apple Inc. is not so great. Therefore, Apple Inc. can achieve fantastic advantage. The Death by workers happened due to the fact that Foxconn did not give the maximum limit for workers, workers are forced......

Words: 1910 - Pages: 8

How Can Firms Use Models of Analysis to Understand Their Business Environment? Discuss Using Appropriate Examples.

...How can firms use models of analysis to understand their business environment? Discuss using appropriate examples. Organizations can use one business analysis model to analyse a section of its business or combine this with other business models to help them in the strategic planning process to gain a competitive advantage in today’s fast changing markets. SWOT and TOWS are acronyms for strengths, weaknesses, opportunities and threats. SWOT (internal-external) provides a checklist of strengths, weaknesses to minimize, uncover opportunities to take advantage of and identify threats to avoid. Whereas the TOWs matrix is (external-internal) matching internal strengths and weaknesses with external opportunities and threats provides a more in depth look at your company’s standing in its current market and gives an understanding of your competitors. External Opportunities (O) External Threats (T) Internal Strengths (S) (SO) Maxi-Maxi Strategy Use strengths to create opportunities (ST) Maxi-Mini Strategy Use strengths to minimise threats Internal Weaknesses (W) (WO) Mini-Maxi Strategy Minimize weaknesses to take advantage of opportunities (WT) Mini-Mini Strategy DEFENSIVE Minimize weaknesses and avoid threats It is important to use verifiable statements such as “Opportunities to save $10M in changing supplier” rather than “Opportunities to save will be good if we change supplier”. If the business is small it is important to know the risks and limitations in......

Words: 1249 - Pages: 5

How to Avoid Erp Failure

...How to Avoid SAP ERP Implementation Failure 1. Introduction Any company which is implementing an ERP either a small scale or large organizations is taking huge risk as they have to invest a lot of money and it is a time taking process with risks involved. Risks and issues are part and parcel of every major IT transformation project. When we place this in point of large transformation projects like SAP or Oracle these risks and issues can be huge which can collapse the entire project if not managed and monitored periodically. SAP frameworks have executed effectively more then 40000+ clients on the planet and most extend disappointments are not identified with the item or programming however basically attached to extend execution and the product usage accomplice. As defined by Rowe ERP as “ERP systems represent the implementation of old managerial dream of unifying and centralizing all the information systems into a combined one”. The existing techniques or process which is being followed during the implementation have failed so we need to be innovative by following the standard process. In this paper we would discuss about the problems while implementing an ERP and how to overcome those to implement it successfully. 2. Statement of the problem In the late 1990-2005 most of the companies which invested in ERP 50-70% of them have faced a huge disappointment and huge losses. . In a survey it is found that 56% of implementation costs over budget, average of that over budget......

Words: 2199 - Pages: 9

How to Avoid Plagiarism

...How to Avoid Plagiarism - Examples of Quoting and Paraphrasing*: Quoting means using another author’s exact words in your text. The citation must be placed in quotation marks (“…”) in your text, using the appropriate bibliographical referencing style (see resources below). Websites, pictures, statistics, graphs and tables taken from another source must be referenced.   ~ Referencing styles may vary according to faculty, discipline and even professor; ask your professor which style you should use (for example, APA, MLA, Chicago Manual). Original Text: Over time technology has been instrumental in increasing industrial and agricultural production, improving transportation and communications, advancing human health care and overall improving many aspects of human life. However, much of its success is based on the availability of land, water, energy, and biological resources of the earth.   Pimental, David. (1998). Population growth and the environment: Planetary stewardship. Electronic Green Journal, 1(9). Retrieved from http://repositories.cdlib.org/uclalib/egj/vol1/iss9/art10 Samples: Research has shown that technology has been instrumental in increasing industrial and agricultural production, improving transportation and communications, advancing human health care and overall improving many aspects of human life. However, much of its success is based on the availability of land, water, energy, and biological resources of the earth. Research has shown......

Words: 902 - Pages: 4

What Is a Firm and How They Set Prices?

...35) defines firms as ‘An economic organization that coordinates the process of production and distribution’. In addition, ‘Firms are arranged frameworks relating people, things, knowledge, and technologies, in a design intended to achieve specific goals’ (Clegg et al, 2011). The main concept behind firms is to transform the input into outputs (Sloman et al, 2013). To give out a few examples of firms in different production lines for instance as clothes, cars, phones and others such as Apple and Samsung, H&M and Gucci, BMW and General Motors. According to Coase (as cited in Formaini, R and Siems, T, 2003) the firms are responsible for production and distribution of goods and services and firms are of upmost importance because they reduce the transaction costs which would usually cost a lot more if carried out by an individual compared to the firm. We will discuss transaction costs in greater details; however, it’s also important to know how firms are organized and how they operate. Firms are organized and they operate in different manners and ways for instance, goods and services they produce, the industries they are located in, the size of the operating firm, and the legal structure of the firm. The legal framework of the firm is very important and will have an impact on its performance, production and operations and thus we will be concentrating on it in order to exemplify the classification of firms in different ways. In the UK, there are several types of firm, each......

Words: 2963 - Pages: 12

How We Failed the Net Generation

...How we failed the net generation..Authors:Badke W.Affiliation:Trinity Western University, badke@twu.com .Source:Online (ONLINE), 2009 Jul-Aug; 33(4): 47-9.Publication Type:journal article.Language:English.Major Subjects:Information Needs Information Seeking Behavior Libraries, Academic Students, College.Minor Subjects:Information Literacy ; Internet ; Search Engines.Journal Subset:Computer/Information Science; Online/Print; USA.ISSN:0146-5422.MEDLINE Info:NLM UID: 9877335.Publisher Info:URL: www.cinahl.com/cgi-bin/refsvc?jid=296&accno=2010356030.Entry Date:20090821.Accession Number:2010356030.Database:CINAHL Plus with Full Text... Translate Full Text:. Choose LanguageEnglish/ArabicEnglish/Bulgarian英语/简体中文英語/繁體中文English/CzechEnglish/DanishEnglish/DutchAnglais/FrançaisEnglisch/DeutschEnglish/GreekEnglish/HausaEnglish/HebrewEnglish/HindiEnglish/HungarianEnglish/IndonesianInglesi/Italiano英語/日本語English/KoreanEngelsk/NorskEnglish/PersianEnglish/PolishInglés/PortuguêsEnglish/PashtoEnglish/RomanianАнглийский/РусскийInglés/EspañolEnglish/SerbianEnglish/SwedishEnglish/ThaiEnglish/Urdu . ... . ... HTML Full Text How We Failed the Net Generation Contents HOW WE FAILED THEM TWO FRONTS WHERE WE LET THEM DOWN WHY LIBRARIES ARE ALIEN TO NET GEN-ERS MORE GUIDANCE NEEDED GOOGLE PREDOMINATES AT UNIVERSITIES WHAT TO DO NOW IT COMES DOWN TO THIS . Listen. American AccentBritish AccentAustralian AccentSlow Reading SpeedMedium Reading SpeedFast...

Words: 2376 - Pages: 10

How to Use

...How to use the niche club preparation folder This folder is divided into 9 main parts: 1. Must Do – This folder contains essential readings that we consider are extremely important for your interviews. 2. Should Do – This folder contains important readings that one should read after finishing the “Must Do” folder. It builds upon the articles on the “Must Do” folder. 3. Can Do – This folder contains articles referring to a variety of topics on marketing. This folder would help you look more knowledgeable in an interview if they quiz you on these topics. 4. Career Guide – The career guide helps you decide why marketing should be your career option. It also talks about the skills required to be a successful marketer. 5. Brand Updates – This folder contains information about different companies and must be done once you get the shortlists from these companies. 6. REMs – This folder contains all the documents used in the Niche placement preparation REMs. 7. Questions asked in summers – This folder contains questions that were asked by different companies in the previous years. We are updating the folder with feedback from as many Tuchhas as possible but it will not contain the entire spectrum of questions and should be used only to identify a trend. 8. Interesting links – This folder contains interesting links that we think are useful for you. We would keep updating the same during the course of your preparation. 9. Newsletters – This folder contains the Niche newsletters and......

Words: 325 - Pages: 2

The Digital Firm and the Use of Technology

...Digital firm is an organization where nearly all significant business processes and relationships with customers, suppliers, and employees are digitally enabled, and key corporate assets are managed through digital means. This means that a firm communicates a lot of information through electronics. With technology expanding every day, it makes business communicate and do business electronically. This saves the company money by not having to send staff to meetings; the meetings can be done by phone conference or even teleconference, where it can be viewed on computer. An organization that uses technology on a daily basis is UW Health. Using electronic health records make the patient information available to providers, with most providers having smart phones, and access to internet at all times it makes providing care possible at all times of the day. Technology has come a long way in terms of health care. Using electronic health records also makes patient care easier and more accurate by allowing multiple providers to view the information in the time of an emergency, or specialty appointment. Keeping everything up to date and accurate in the chart makes the care go smoother, and makes the patient feel more comfortable when the information can be viewed. Technology is also used within the organization to communicate between departments, and used in training atmospheres. With having access to computers, it is possible to attend meetings from wherever you are, and not have......

Words: 382 - Pages: 2