AAA Spark Meeting of the Regions

Do Private Tax Disclosures Affect the Quality of Public Financial Reporting?

• In Event: Financial Reporting Quality

Abstract

This study investigates whether increased private tax disclosures have implications for the quality of public financial reporting in the context of Schedule UTP. In terms of the predictive value of tax reserves, I find that firms reverted from being over-reserved to being adequately reserved post-Schedule UTP. In terms of the confirmatory value of tax reserves, I find that firms report more accurate tax reserves post-Schedule UTP, as evidenced by the higher explanatory power of the UTB prediction model (Rego and Wilson 2012) and reduced tax expense management post-Schedule UTP. Overall, this study provides evidence that increased private tax disclosures have positive externalities on firms’ public financial reporting, and Schedule UTP may have to some extent achieved the goal intended by the FASB.

Author

• Juan Wu, Minnesota State University Mankato