Professor Igor Goncharov of the Department of Accounting and Finance was awarded the prestigious prize for the paper “Why Do Countries Mandate Accrual Accounting for Tax Purposes?” published in the Journal of Accounting Research (co-authored with Martin Jacob).

The prize is awarded annually for the best paper published in top-tier journals in any of the management fields including accounting, banking and finance, marketing, operations research and international management.

Professor Goncharov's article examines how regulators can select accounting rules to optimize the portfolio of government revenues and expenditures. Using a theoretical model with the data from OECD countries shows that the use of accrual accounting in the definition of taxable income lowers volatility and increases predictability of corporate tax revenues.

The results can help governments better predict the likely consequences of tax reforms that change the extent of accrual accounting in the definition of taxable income. The results of the research project are also interesting for companies considering international expansion. Local taxation is an important consideration for the choice of where to locate foreign operations and the mode of investment. While corporate income tax rates are easily observable and are frequently used in the decision making, the accounting rules that determine corporate taxes are less transparent and are frequently disregarded in decision making. The study suggests that tax accounting rules are an important consideration because they substantially vary across countries and affect the magnitude and volatility of corporate cash outflows. In other words, the magnitude of tax payments and the riskiness of firm international expansion critically depend on the tax accounting rules of the location chosen for the international expansion. The paper provides a metric which can help firms to screen countries best-suited for international expansion.