IDEAS home Printed from https://ideas.repec.org/a/ibf/acttax/v15y2023i1p27-41.html
   My bibliography  Save this article

Fasb Fin 48 Disclosures: Evidence On User Perceptions

Author

Listed:
  • Thomas Smith
  • Adrian Valencia
  • Ara Volkan
  • Jordin Vorisek

Abstract

This study analyzes how financial statement users (users) interpret disclosures related to Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). While past research has examined the decision usefulness of various aspects of FIN 48 balances reported in the financial statements, there are no studies that examine the impact that FIN 48 disclosures have on the financial decisions the users make. This study aims to fill this gap by conducting an experiment to find evidence that users find FIN 48 disclosures useful in evaluating the conduct of a firm’s management. Specifically, the study examines and finds that users regard FIN 48 disclosures as more of an indication that the management is enhancing the transparency of the financial statement information provided rather than using aggressive tax strategies. The finding of this study is important to standard setters as it suggests that users are interpreting the disclosures consistent with the intention of the FASB. This finding is also important to companies who may be hesitant to increase the robustness of FIN 48 disclosures as this study suggests that the outcome of such practices would likely improve the perception of the company in the users’ eyes

Suggested Citation

  • Thomas Smith & Adrian Valencia & Ara Volkan & Jordin Vorisek, 2023. "Fasb Fin 48 Disclosures: Evidence On User Perceptions," Accounting & Taxation, The Institute for Business and Finance Research, vol. 15(1), pages 27-41.
    • Handle: RePEc:ibf:acttax:v:15:y:2023:i:1:p:27-41
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v15n1-2023/AT-V15N1-2023-2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cristi A. Gleason & Lillian F. Mills & Michelle L. Nessa, 2018. "Does FIN 48 Improve Firms' Estimates of Tax Reserves?," Contemporary Accounting Research, John Wiley & Sons, vol. 35(3), pages 1395-1429, September.
    2. Borkowski, Susan C. & Gaffney, Mary Anne, 2021. "FIN 48 and the tax aggressive behaviors of transnational corporations: A decade later," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    3. Sanjay Gupta & Rick C. Laux & Daniel P. Lynch, 2016. "Do Firms Use Tax Reserves to Meet Analysts’ Forecasts? Evidence from the Pre†and Post†FIN 48 Periods," Contemporary Accounting Research, John Wiley & Sons, vol. 33(3), pages 1044-1074, September.
    4. Blouin, Jennifer & Gleason, Cristi & Mills, Lillian & Sikes, Stephanie, 2007. "What Can We Learn About Uncertain Tax Benefits From FIN 48?," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(3), pages 521-535, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guanming He & Helen Mengbing Ren & Richard Taffler, 2020. "The impact of corporate tax avoidance on analyst coverage and forecasts," Review of Quantitative Finance and Accounting, Springer, vol. 54(2), pages 447-477, February.
    2. Lin, Shannon & Tong, Naqiong & Tucker, Alan L., 2014. "Corporate tax aggression and debt," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 227-241.
    3. Müller, Raphael & Spengel, Christoph & Vay, Heiko, 2020. "On the determinants and effects of corporate tax transparency: Review of an emerging literature," ZEW Discussion Papers 20-063, ZEW - Leibniz Centre for European Economic Research.
    4. Konda, Laura & Patel, Elena & Seegert, Nathan, 2022. "Tax enforcement and the intended and unintended consequences of information disclosure," Journal of Public Economics, Elsevier, vol. 212(C).
    5. Graham, John R. & Raedy, Jana S. & Shackelford, Douglas A., 2012. "Research in accounting for income taxes," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 412-434.
    6. Michael P. Donohoe & Gary A. McGill & Edmund Outslay, 2014. "Risky Business: The Prosopography of Corporate Tax Planning," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(4), pages 851-874, December.
    7. Evers, Maria Theresia & Meier, Ina & Spengel, Christoph, 2014. "Transparency in financial reporting: Is country-by-country reporting suitable to combat international profit shifting?," ZEW Discussion Papers 14-015, ZEW - Leibniz Centre for European Economic Research.
    8. Cristian Carini & Michele Moretto & Paolo M. Panteghini & Sergio Vergalli, 2020. "Deferred taxation under default risk," Journal of Economics, Springer, vol. 129(1), pages 33-48, January.
    9. Kathleen Petrie Fuller & Qun Wu & Serhat Yildiz, 2024. "Corporate debt policy and tax uncertainty," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 247-270, January.
    10. Yost, Benjamin P., 2023. "Do tax-based proprietary costs discourage public listing?," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    11. Andrew R. Finley, 2019. "The impact of large tax settlement favorability on firms’ subsequent tax avoidance," Review of Accounting Studies, Springer, vol. 24(1), pages 156-187, March.
    12. Yi (Dale) Fu & Youngdeok Lim & Elizabeth Carson, 2024. "Accounting firm office size and tax aggressiveness," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 1183-1219, March.
    13. Borkowski, Susan C. & Gaffney, Mary Anne, 2021. "FIN 48 and the tax aggressive behaviors of transnational corporations: A decade later," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    14. Beardsley, Erik L. & Robinson, John R. & Wong, Paul A., 2021. "What's my target? Individual analyst forecasts and last-chance earnings management," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    15. Feldman, Naomi & Kawano, Laura & Patel, Elena & Rao, Nirupama & Stevens, Michael & Edgerton, Jesse, 2021. "Investment differences between public and private firms: Evidence from U.S. tax returns," Journal of Public Economics, Elsevier, vol. 196(C).
    16. Evers, Andrea & Hundsdoerfer, Jochen, 2014. "Country-by-Country Reporting: Eine neue Rechnungslegung über länderspezifische Wertschöpfung und Ertragsteuern?," Discussion Papers 2014/20, Free University Berlin, School of Business & Economics.
    17. Martin Jacob & Kelly Wentland & Scott A. Wentland, 2022. "Real Effects of Tax Uncertainty: Evidence from Firm Capital Investments," Management Science, INFORMS, vol. 68(6), pages 4065-4089, June.
    18. Lisa De Simone & Jordan Nickerson & Jeri Seidman & Bridget Stomberg, 2020. "How Reliably Do Empirical Tests Identify Tax Avoidance?†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1536-1561, September.
    19. Stevanie S. Neuman & Thomas C. Omer & Andrew P. Schmidt, 2020. "Assessing Tax Risk: Practitioner Perspectives," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1788-1827, September.
    20. Sean T. McGuire & Stevanie S. Neuman & Sarah C. Rice, 2020. "Interim Effective Tax Rate Estimates and Internal Control Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 603-633, March.

    More about this item

    Keywords

    Uncertain Tax Positions; Educated Non-Professional Investors; Information Usefulness; Financial Statement Transparency; Aggressive Tax Strategies;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:acttax:v:15:y:2023:i:1:p:27-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.