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Firm Valuation with Deferred Taxes: A Theoretical Framework

Author

Listed:
  • Amir, E.
  • Kirschenheiter, M.
  • Willard, K.

Abstract

This paper proposes a method for valuing a firm's debt and equity that relies on readily-accessible current accounting data applied in an easily understood and intuitively appealing manner and which addresses the impact of a firm's accounting for taxes on a its economic profitability. We derive parsimonious expressions for the value of a firm's equity and debt in terms of current book values and future abnormal earnings which require no separate adjustments for deferred tax balances.

Suggested Citation

  • Amir, E. & Kirschenheiter, M. & Willard, K., 1997. "Firm Valuation with Deferred Taxes: A Theoretical Framework," Papers 97-13, Columbia - Graduate School of Business.
  • Handle: RePEc:fth:colubu:97-13
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    Citations

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    Cited by:

    1. De Waegenaere, A.M.B. & Sansing, R. & Wielhouwer, J.L., 2001. "Valuation of Deferred Tax Assets From a Net Operating Loss Carryover," Discussion Paper 2001-24, Tilburg University, Center for Economic Research.
    2. repec:eee:joecas:v:11:y:2014:i:c:p:138-145 is not listed on IDEAS
    3. repec:eee:jocaae:v:10:y:2014:i:2:p:87-99 is not listed on IDEAS
    4. repec:eee:jocaae:v:6:y:2010:i:2:p:47-60 is not listed on IDEAS
    5. Wessel M. Badenhorst & Petri H. Ferreira, 2016. "The Financial Crisis and the Value-relevance of Recognised Deferred Tax Assets," Australian Accounting Review, CPA Australia, vol. 26(3), pages 291-300, September.
    6. Dreher, Sandra & Eichfelder, Sebastian & Noth, Felix, 2017. "Predicting earnings and cash flows: The information content of losses and tax loss carryforwards," IWH Discussion Papers 30/2017, Halle Institute for Economic Research (IWH).
    7. Tomás Lopes Ilídio, 2014. "The information compliance indexes: The illustrative case of income taxes," Contaduría y Administración, Accounting and Management, vol. 59(4), pages 11-37, octubre-d.
    8. repec:eee:advacc:v:30:y:2014:i:1:p:32-42 is not listed on IDEAS
    9. repec:eee:reacre:v:28:y:2016:i:2:p:77-85 is not listed on IDEAS
    10. repec:eee:spacre:v:17:y:2014:i:2:p:174-182 is not listed on IDEAS
    11. Flagmeier, Vanessa & Müller, Jens, 2016. "Tax loss carryforward disclosure and uncertainty," arqus Discussion Papers in Quantitative Tax Research 208, arqus - Arbeitskreis Quantitative Steuerlehre.
    12. Flagmeier, Vanessa, 2017. "The information content of tax loss carryforwards: IAS 12 vs. valuation allowance," arqus Discussion Papers in Quantitative Tax Research 216, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item

    Keywords

    DEBT ; EQUITY ; ACCOUNTING ; TAXES;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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