Differences between accounting and fiscal information in the prediction of results under IFRS-based tax rules

Abstract

Purpose: To assess the effect of differences between accounting and tax information as well as the adoption of IFRS as tax standards on the persistence of accounting and tax results.
Methodology: The autoregressive model was used to estimate the effects of book-tax differences and IFRS on the persistence of results on data collected from 83 Ecuadorian companies from 2011 to 2018.
Results: Book-tax differences have an incremental effect on the persistence of the accounting result and the fiscal result. The adoption of IFRS in tax legislation affected the tax results but had no effect on the persistence of results.
Implications: Results suggest that book-tax differences constitute a relevant indicator for market players and for tax authorities. Reducing the differences between the accounting and tax systems in the context of IFRS adoption may help achieve tax goals but does not necessarily improve the quality of results.
Originality: It contributes to the study of the effects of book-tax differences on the persistence of accounting system and fiscal results using fiscal outcome values instead of proxies. The effect of the use of IFRS as standards for calculating the fiscal result is examined.