Tax Incentives and Fair Value Accounting for Intangible Assets

Using hand-collected data from purchase price allocations, I examine whether tax incentives influence the publicly reported fair values of acquired intangible assets. Post-acquisition accounting requires that the purchase price be allocated among the net assets of the acquired business based on their fair values with any remainder reported as goodwill. The tax planning strategies of US multinationals often employ related-party intangibles transactions to direct related-party royalty payments from higher tax locations to a lower tax country. Such tax planning activities may affect the purchase price allocation to intangibles and goodwill for financial reporting purposes because contradictory valuations make it harder to defend a tax position. I find that firms with foreign operations or higher average foreign tax rates allocate less of the purchase price to goodwill, consistent with allocating more to intangible assets. This result suggests that tax incentives may mitigate the financial reporting incentives to overstate goodwill found in prior research. I also find evidence consistent with tax incentives resulting in understated values of technology intangibles relative to marketing intangibles.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Accounting

Grantor

University of Houston

Year dc:date.issued

2014

Author dc:creator

• Howard, Jennifer K.

Advisor dc:contributor.advisor

• Newberry, Kaye J.

Committee members dc:contributor.committeemember

• Meade, Janet A.
• Kilic, Emre
• Rude, Dale

• Intangible Valuation
• Goodwill
• Foreign Tax Rates
• Multinational
• Transfer Pricing
• Income Shifting

Statement dc:rights

• The author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s).

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/10657/2734

OAI identifier oai:identifier

oai:uh-ir.tdl.org:10657/2734