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Simplifying Deferred Taxes.
Title
Simplifying Deferred Taxes.
Creator
Conrecode, Jacqueline, Valencia, Adrian, Volkan, Ara, Burgess, Deanna
Abstract / Description
This paper summarizes the asset/liability approach described in Accounting Standard Codification Topic 740 and highlights four flaws in the current accounting standards. The paper proposes three alternatives to the asset/liability method offering improvements in the current standard and avenues for future research. Empirical evidence for these alternatives is provided demonstrating increases in the debt-equity ratio and resulting improvements in the relevance/reliability of this important...
Show moreThis paper summarizes the asset/liability approach described in Accounting Standard Codification Topic 740 and highlights four flaws in the current accounting standards. The paper proposes three alternatives to the asset/liability method offering improvements in the current standard and avenues for future research. Empirical evidence for these alternatives is provided demonstrating increases in the debt-equity ratio and resulting improvements in the relevance/reliability of this important benchmark in investment decisions.
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Date Issued
2012-01-01
Identifier
fgcu_ir_000341
Format
Citation
Accounting For Deferred Taxes: Time For A Change.
Title
Accounting For Deferred Taxes: Time For A Change.
Creator
Volkan, Ara, Rue, Joseph, Colley, Ron, Valencia, Adrian
Abstract / Description
This study examines the theory underlying the current accounting and reporting standards for deferred taxes. Given the goal of global accounting convergence and under the proposed condorsement approach, the FASB and the IASB have a historic opportunity to revise the existing deferred tax accounting standards. Thus, it is warranted to illustrate the financial consequences of using the proposed flow-through (where tax expense is equal to the statutory tax liability) approach versus the asset...
Show moreThis study examines the theory underlying the current accounting and reporting standards for deferred taxes. Given the goal of global accounting convergence and under the proposed condorsement approach, the FASB and the IASB have a historic opportunity to revise the existing deferred tax accounting standards. Thus, it is warranted to illustrate the financial consequences of using the proposed flow-through (where tax expense is equal to the statutory tax liability) approach versus the asset-liability method of accounting for deferred taxes. We achieve this objective by computing the change in the debt-to-equity (DTE) ratios for the 2004-2010 period when net deferred tax balances are eliminated and corresponding adjustments are made in the total liability and stockholders equity balances. Based on our observations, we propose that the underlying issue in accounting for deferred taxes is the unit problem and argue that deferred taxes do not represent assets and liabilities as defined by accounting standards.
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Date Issued
2012-03-01
Identifier
fgcu_ir_000355, 10.19030/jber.v10i3.6873
Format
Document (PDF)
Industry specific impact of simplifying deferred taxes.
Title
Industry specific impact of simplifying deferred taxes.
Creator
Volkan, Ara, Valencia, Adrian, Acheampong, Daniel
Abstract / Description
This paper summarizes the asset/liability approach described in Accounting Standard Codification Topic 740 and highlights the flaws in the current accounting standards. The paper proposes an alternative to the asset/liability method, offering improvements in the current standard and avenues for future research. Industry specific empirical evidence for this alternative is provided for the pre- and post-financial crisis periods. The results generally demonstrate decreases in the debt-equity...
Show moreThis paper summarizes the asset/liability approach described in Accounting Standard Codification Topic 740 and highlights the flaws in the current accounting standards. The paper proposes an alternative to the asset/liability method, offering improvements in the current standard and avenues for future research. Industry specific empirical evidence for this alternative is provided for the pre- and post-financial crisis periods. The results generally demonstrate decreases in the debt-equity ratio, improving the relevance and reliability of this important benchmark in investment decisions. In February 2013, the Financial Accounting Foundation selected ASC-740 for its post-implementation review process. The review will assess the standard’s effectiveness in both the accounting guidance it provides and information disclosed to investors. The adoption of the accounting method proposed in this paper will address the deficiencies inherent in ASC-740 and provide input to the post-implementation review of ASC-740.
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Date Issued
2013-07-01
Identifier
fgcu_ir_000354
Format
Document (PDF)
An Alternative Method Of Accounting For Stock Options.
Title
An Alternative Method Of Accounting For Stock Options.
Creator
Volkan, Ara, Smith, Thomas, Valencia, Adrian
Abstract / Description
Currently, the grant date fair value of employee stock options is expensed over the vesting period. Our study introduces a new valuation approach for stock options and examines the impact of this change on earning per share (EPS) for a sample of firms over the period 2002-2011. The new valuation approach provides data useful to the Financial Accounting Standards Board (FASB) as it determines whether to revise the current option accounting rules. Under the proposed approach, options are valued...
Show moreCurrently, the grant date fair value of employee stock options is expensed over the vesting period. Our study introduces a new valuation approach for stock options and examines the impact of this change on earning per share (EPS) for a sample of firms over the period 2002-2011. The new valuation approach provides data useful to the Financial Accounting Standards Board (FASB) as it determines whether to revise the current option accounting rules. Under the proposed approach, options are valued at their intrinsic value on the grant date (i.e., the opportunity cost or the economic promise associated with the difference between the exercise price of the option and the market price of the stock at each measurement date) and further revalued each reporting date until the options are exercised.
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Date Issued
2014-03-01
Identifier
fgcu_ir_000353, 10.19030/jabr.v30i2.8415
Format
Document (PDF)
Measuring the Economic Promise Imbedded in Stock Options.
Title
Measuring the Economic Promise Imbedded in Stock Options.
Creator
Volkan, Ara, Pinello, Arianna, Valencia, Adrian
Abstract / Description
On Jun 6, 2014, the CPA Letter Daily reported that, with convergence nearly complete, FASB will turn its focus to the simplification of accounting standards. In that vein, this article introduces a theoretical model of measuring stock options expense (SOE): the economic promise (EP) model. Although FASB contends that the market value of a company's stock should not be used in determining its equity and that changes in value should not be recognized in earnings, the authors of this article...
Show moreOn Jun 6, 2014, the CPA Letter Daily reported that, with convergence nearly complete, FASB will turn its focus to the simplification of accounting standards. In that vein, this article introduces a theoretical model of measuring stock options expense (SOE): the economic promise (EP) model. Although FASB contends that the market value of a company's stock should not be used in determining its equity and that changes in value should not be recognized in earnings, the authors of this article agree that the market value of a company's stock must be used to accurately measure and report SOE. This EP model determines total SOE at intrinsic values -- that is, the difference between the stock's market price and option price at a given date. The authors expect SOE estimated under the EP model to significantly differ from SOE reported under current rules; this suggests that, if adopted, the EP model would have a significant impact on amounts reported for net income and earnings per share.
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Date Issued
2015-04-01
Identifier
fgcu_ir_000352
Format
Citation