Difference between Accounting Profit and Taxable Profit: An Analysis of Management of Accounting Results and Tax Management at Brazilian Public Companies

Abstract

This study aimed at knowing the general composition of the difference between the accounting results and tax result (book-tax differences-BTD) in Brazilian public companies in order to identify the explanation for this difference, either through the management of the earnings management (EM) and/or the taxes management (TM), or even by none of them. The research, exploratory and descriptive in nature, was based on a sample composed by the Brazilian public companies, making up a total of 276 company-years. Data analysis included the period from 2000 to 2005 and used the econometric models proposed by KS (1995) and Pae (2005) which permitted to analyze the level of management of results by means of discretionary accruals. The results achieved suggest that the models applied do not provide the support necessary for the determination of outcome management and tax management, as well as to identify the relation between these two practices and BTD. Therefore, we cannot conclude that there is a manipulation of results and/or taxes on the part of the Brazilian public companies considered in the sample, and of relation between these practices.

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

“…This finding is in line with previous studies that have shown that BTD provide information about the earnings quality (Guenther, 2011;Tang & Firth, 2011;Tang & Firth, 2012;Hanlon, 2005;Formigoni et al, 2009;Blaylock et al, 2012). The reduced number of listed Tunisian companies on the Tunisian Stock Exchange limits the generalization of this finding.…”

“…Further studies have used the total differences as a measure of BTD (Mills & Newberry, 2001;Lev & Nissim, 2004;Weber, 2009;Dhaliwal et al, 2009;Manzon & Plesko, 2002) (Note 4). Some other studies have analyzed the DCF through its decompositions into normal and abnormal differences (Tang & Firth, 2011;Tang & Firth, 2012;Formigoni et al, 2009). These studies have referred to Desai and Dharmapala (2006).…”

Determinantes das Book-Tax Differences em Empresas Brasileiras: uma Análise a Partir do Tamanho da Empresa

“…A primeira causa é o desalinhamento das normas que orientam a forma de cálculo do resultado financeiro e do resultado tributário (Desai, 2005;Formigoni, Antunes & Paulo, 2009). De acordo com Plesko (2000), os relatórios fiscais e financeiros são sistemas de contabilidade separados que, embora inter-relacionados, possuem objetivos distintos.…”

“…Por exemplo, os resultados da contabilidade financeira têm a finalidade de informar aos usuários os lucros que podem ser distribuídos (Hanlon, 2005;Hanlon & Heitzman, 2010), ao passo que a contabilidade tributária tem a finalidade de informar o lucro a ser tributado (Weber, 2009). As diferenças geradas por esse desalinhamento podem ser de dois tipos: permanentes e temporárias (Formigoni et al, 2009). As diferenças permanentes são originadas da diferença entre os tratamentos das normas contábeis e fiscais.…”

An Assessment of the Linkage between Financial Reporting and Taxation in Tunisia

“…Epps and Oh (1997) show that, at the announcement of the earnings of foreign companies, US investors react more when these firms are located in Anglo-Saxon countries than when these are located in continental countries (where the accounting system is used more for tax requirements). Many studies have examined this area in various countries (Aisbitt, 2002;Blake et al, 1993, Blake et al, 1997Rossignol, 1999;Rossignol, 2002;Whitaker, 2005;Nobes, 2004;Formigioni, 2009) which have different approach regarding this relationship. In continental countries, Haller (1992) and Radcliffe (1993) found that accounting is considered as an instrument of taxation which implies a strong correlation between both.…”