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Taxes and transfer pricing: income shifting and the volume of intrafirm transfers

Article Abstract:

A study extending a 1993 paper by Harris is conducted. It relates the level of taxes paid by firms and the profits they disclose in different geographic areas to the volume of intergeographic area transactions within firms. Firms with large volumes of global intrafirm sales and large differences in tax rates between regions have the best opportunities and incentives for manipulation, given that firms use the prices for goods distributed globally to reduce global taxes. These firms make up the 'flexibility partition' with the biggest incentives and opportunities for transfer price management. Results show that tax-motivated income shifting via transfer prices was common before and after the Tax Reform Act of 1986. The amount of the income shifting seems to be associated with the volume of intrafirm global transfer of goods and services and regional differences in tax rates. The implication is that transfer prices provide the mechanism for income shifting.

Research, Transfer pricing, Income shifting

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Electric utility stranded costs: valuation and disclosure issues

Article Abstract:

Uncertainty about recovering costs after deregulation can be reduced by having normalized stranded cost recovery methods. Investors expect to pay 10% of regulatory change costs, but are less willing to pay for utility management decisions resulting in additional cost.

Electric Utilities, Electric Power Generation, Transmission and Distribution, Electric services, Economic aspects, Accounting and auditing, Corporations, Deregulation, Valuation

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Cost-system choice and incentives - traditional vs. activity-based costing

Article Abstract:

The use of activity--based costing (ABC) vs traditional cost accounting is explained by the amount of certainty that the manager has private information. Profits are higher in the case of using the ABC system when uncertainly about manager knowledge is high.

Accounting, auditing, & bookkeeping, Accounting & Auditing Services, Accounting, Tax Preparation, Bookkeeping, and Payroll Services, Analysis, Activity-based costing

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