IDEAS home Printed from
   My bibliography  Save this paper

Estimates of the Magnitude of Financial and Tax Reporting Conflicts


  • George A. Plesko


This study examines the tax reporting consequences of financial reporting discretion. Using a matched sample of financial statements with tax returns, I provide estimates of the accuracy of tax return information inferred from financial statements. To examine the tradeoffs between financial and tax reporting, I model the relation discretionary financial accounting accruals have to discretionary federal tax accruals. The methodology takes advantage of the contemporaneous nature of reporting to mitigate econometric problems identified in previous research. I find the extent tax reporting reflects discretionary financial reporting varies dramatically by industry, profitability, and the sign of discretionary accruals. I also find managers are able to undertake tax reducing activities with less of an effect on financial reporting than tax increasing accruals, consistent with recent evidence on the differential growth of book and tax income, and with tax avoidance activities.

Suggested Citation

  • George A. Plesko, 2007. "Estimates of the Magnitude of Financial and Tax Reporting Conflicts," NBER Working Papers 13295, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13295
    Note: PE

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Calegari, Michael J., 2000. "The effect of tax accounting rules on capital structure and discretionary accruals," Journal of Accounting and Economics, Elsevier, vol. 30(1), pages 1-31, August.
    2. Mills, Lillian F. & Plesko, George A., 2003. "Bridging the Reporting Gap: A Proposal for More Informative Reconciling of Book and Tax Income," National Tax Journal, National Tax Association, vol. 56(4), pages 865-893, December.
    3. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    4. repec:bla:joares:v:36:y:1998:i:2:p:343-356 is not listed on IDEAS
    5. Plesko, George A., 2003. "An evaluation of alternative measures of corporate tax rates," Journal of Accounting and Economics, Elsevier, vol. 35(2), pages 201-226, June.
    6. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
    7. Hung, Mingyi, 2000. "Accounting standards and value relevance of financial statements: An international analysis," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 401-420, December.
    8. Plesko, George A., 2004. "Corporate Tax Avoidance and the Properties of Corporate Earnings," National Tax Journal, National Tax Association, vol. 57(3), pages 729-737, September.
    9. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    10. Maydew, Edward L., 2001. "Empirical tax research in accounting: A discussion," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 389-403, September.
    11. McNichols, Maureen F., 2000. "Research design issues in earnings management studies," Journal of Accounting and Public Policy, Elsevier, vol. 19(4-5), pages 313-345.
    12. McGill, Gary A. & Outslay, Edmund, 2004. "Lost in Translation: Detecting Tax Shelter Activity in Financial Statements," National Tax Journal, National Tax Association, vol. 57(3), pages 739-756, September.
    13. repec:bla:joares:v:33:y:1995:i:2:p:353-367 is not listed on IDEAS
    14. Hunt, Alister & Moyer, Susan E. & Shevlin, Terry, 1996. "Managing interacting accounting measures to meet multiple objectives: A study of LIFO firms," Journal of Accounting and Economics, Elsevier, vol. 21(3), pages 339-374, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Evers, Maria Theresia & Finke, Katharina & Matenaer, Sebastian & Meier, Ina & Zinn, Benedikt, 2014. "Evidence on book-tax differences and disclosure quality based on the notes to the financial statements," ZEW Discussion Papers 14-047, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Jacob Thomas & Frank Zhang, 2007. "Tax Expense Surprises and Future Returns," Yale School of Management Working Papers amz2531, Yale School of Management, revised 01 Feb 2008.
    3. Gebhardt Heinz & Siemers Lars-H. R., 2017. "Die relative Steuerbelastung mittelständischer Kapitalgesellschaften: Evidenz von handelsbilanziellen Mikrodaten," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 66(1), pages 1-35, April.
    4. Evers, Maria Theresia, 2015. "Evidence on Book-tax Differences and Disclosure Quality Based on the Notes to the Financial Statements," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113127, Verein für Socialpolitik / German Economic Association.
    5. Rebekka Kager & Deborah Schanz & Rainer Niemann, 2011. "Estimation of Tax Values Based on IFRS Information: An Analysis of German DAX30 and Austrian ATX Listed Companies," Accounting in Europe, Taylor & Francis Journals, vol. 8(1), pages 89-123, June.

    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:nbr:nberwo:13295. See general information about how to correct material in RePEc.

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

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.