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Income Tax Accounting Policy Choice: Exposure Draft Responses and the Early Adoption Decision by Canadian Companies

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  • Merridee L. Bujaki
  • Bruce J. McConomy

Abstract

We extend prior literature through a detailed examination of the relationship between lobbying behavior and subsequent accounting standard adoption timing, using changes to a Canadian accounting standard with a prolonged transition period. We develop a model linking lobbying and adoption timing. We test hypotheses based on recontracting costs, information production costs, efforts to manage investor perceptions, and corporate governance practices to assess the ability of these factors to explain corporations' choice of adoption timing. We examine responses to the Income Taxes exposure draft using content analysis to identify trends in lobbying behavior. We evaluate the accounting standard adoption decision for Toronto Stock Exchange (TSE) 300 firms using a LOGIT model. Our findings indicate that early adoption appears to be most prevalent for firms that benefit from improved financial statement performance. In contrast, late adopters tend to be firms that have lobbied standard‐setters regarding the out‐of‐pocket costs of the standard and that rate highly on certain corporate governance measures.

Suggested Citation

  • Merridee L. Bujaki & Bruce J. McConomy, 2007. "Income Tax Accounting Policy Choice: Exposure Draft Responses and the Early Adoption Decision by Canadian Companies," Accounting Perspectives, John Wiley & Sons, vol. 6(1), pages 21-53, February.
    • Handle: RePEc:wly:accper:v:6:y:2007:i:1:p:21-53
    DOI: 10.1506/6WX0-6264-M2G7-03P6
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    References listed on IDEAS

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    Cited by:

    1. Sylvain Durocher & Anne Fortin, 2014. "New Canadian Accounting Standards for Private Enterprises and the Adoption Timing Decision," Australian Accounting Review, CPA Australia, vol. 24(3), pages 218-236, September.

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