Department of Accounting
University of Connecticut School of Business
2100 Hillside Road, Unit 1041A
Storrs, CT 06269-1041
Institutional Affiliation: University of Connecticut
NBER Working Papers and Publications
|August 2007||Estimates of the Magnitude of Financial and Tax Reporting Conflicts|
This study examines the tax reporting consequences of financial reporting discretion. Using a matched sample of financial statements with tax returns, I provide estimates of the accuracy of tax return information inferred from financial statements. To examine the tradeoffs between financial and tax reporting, I model the relation discretionary financial accounting accruals have to discretionary federal tax accruals. The methodology takes advantage of the contemporaneous nature of reporting to mitigate econometric problems identified in previous research. I find the extent tax reporting reflects discretionary financial reporting varies dramatically by industry, profitability, and the sign of discretionary accruals. I also find managers are able to undertake tax reducing activities with ...