Journal article
Forecasting Taxes: New Evidence from Analysts
The Accounting review, Vol.92(3), pp.1-29
05/01/2017
DOI: 10.2308/accr-51557
Abstract
We provide new evidence about how analysts incorporate and improve on management ETR forecasts. Quarterly ETR reporting under the integral method provides mandatory point-estimate forecasts by management, but firms must record certain "discrete'' tax items fully in the quarter in which they occur, polluting these forecasts. We investigate management ETR accuracy, analysts' decisions to mimic management's estimate, analysts' accuracy relative to each other or to management, and dispersion. Our comprehensive analysis reveals that analysts deviate from management more and are more accurate relative to management as complexity increases, with real effects on EPS accuracy and dispersion. In contrast to prior research that analysts ignore or are confused by taxes, we provide evidence that analysts pay attention to taxes and improve on management estimates. Based on our evidence that management's quarterly ETRs have less predictive value in the presence of discrete items, we suggest standard-setters reexamine the discrete item exception to require more disclosure.
Details
- Title: Subtitle
- Forecasting Taxes: New Evidence from Analysts
- Creators
- Brian Bratten - University of KentuckyCristi A. Gleason - University of IowaStephannie A. Larocque - University of Notre DameLillian F. Mills - The University of Texas at Austin
- Resource Type
- Journal article
- Publication Details
- The Accounting review, Vol.92(3), pp.1-29
- Publisher
- Amer Accounting Assoc
- DOI
- 10.2308/accr-51557
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Number of pages
- 29
- Grant note
- Beverly H. and William P. O'Hara Chair in Business at The University of Texas at Austin Henry B. Tippie Research Fellowship at the Tippie College of Business Von Allmen Research Support Endowment at the Gatton College of Business and Economics Ernst & Young Fellowship at the Mendoza College of Business
- Language
- English
- Date published
- 05/01/2017
- Academic Unit
- Accounting
- Record Identifier
- 9984380541002771
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