Tax Management and IFRS Financial Reporting Synergies

This paper investigates whether taxes presented according to the IFRS financial statements convey value relevant information. We ask the following questions: do taxes derived from published IFRS financial statements convey information on tax planning policies and thus be used to predict future taxation? Are the IFRS deferred taxation treatments used as vehicles for achieving management's planning strategies? Is IFRS tax information value relevant and fully appreciated by stock market participants? The empirical evidence suggests that past income taxes provide information regarding firms' future tax position. Firms use deferred taxation strategies in order to reduce future tax expenses and meet their tax planning policies. Tax strategies in the framework of IFRS adoption provide value relevant information to stock market participants. Misinterpretation in assessing the tax effects of accounting choices can lead to wrong investment decisions which reveal the necessity for increased regulation on the disclosure of the tax information

The Informativeness of Micro and Macro Information During Economic Crisis and Non-crisis Periods

We investigate whether the informativeness of reported profitability and macroeconomic expectations differs between non-crisis and crisis economic periods by analyzing data for five European Union countries over the period 2005-2011. We find, first, macroeconomic expectations: a) are useful in predicting future profitability only in non-crisis periods, and b) are not useful in predicting stock returns in either period. Second, reported profitability: a) is useful in predicting future profitability in both crisis and non-crisis periods but less so in crisis periods, and b) is useful in predicting returns only in crisis periods. The cash flow component of profitability drives these results while the accrual component appears to be uninformative. Third, expected profitability, implied by the interaction between current profitability and macroeconomic expectations, is informative in predicting future profitability in both crisis and non-crisis periods and is efficiently priced only for high profitability firms during non-crisis periods