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EVIDENCE OF EARNINGS MANAGEMENT FROM THE MEASUREMENT OF THE DEFERRED TAX ALLOWANCE ACCOUNT

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Abstract:

Positive accounting literature has provided empirical evidence regarding firms' characteristics that cause their managers to make particular accounting decisions. The purpose of this study is to extend this line of research to the area of accounting for income taxes. The research is designed to identify accounting choice variables that influence managers' decisions to change the level of the deferred tax asset valuation allowance under SFAS No. 109. Specifically, the study presents an empirical examination of whether managerial discretion over the valuation allowance appears to be used for earnings management purposes. Evidence of earnings management motivations can provide insights into whether it is an appropriate accounting policy to give management considerable discretion to choose the level of the valuation allowance.

Document Type: Research Article

DOI: https://doi.org/10.1080/00137910490432683

Affiliations: 1: Department of Accounting, Tamkang University, Taiwan 2: H. Wayne Huizenga School of Business and Entrepreneurship, Nova Southeastern University, Fort Lauderdale, Florida 3: Department of Industrial Engineering and Management, National Taipei University of Technology, Taiwan

Publication date: 2004-01-01

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