External Forces Driving the Growth of the Electrical Vehicle Market

Dr. Kathryn Ready, Winona State University, Winona, MN

Geoffrey Curry, Winona State University, Winona, MN

ABSTRACT

The market share for electric vehicle sales in the automobile industry is predicted to grow from less than 3% of all automobile sales globally in 2018 to over one half of all production, or 57% by 2040 (BloombergNEF, 2019). This projected growth is driven, in part, by large global manufacturers that are investing billions of dollars to increase electrical vehicle production capabilities.  BloombergNEF (2019) estimates that by 2025, manufacturers will offer nearly 400 EV models with Volkswagen expected to launch 80 models, compared to 47 models for BMW, 28 models for Ford and 10 models for Toyota. These examples provide evidence that the success and development of electrical vehicle production is proceeding across global markets, but the development is not uniform across markets.  Many external factors including political, economic, social, technological, environmental, and legal factors are playing a major role in supporting the development and growth of the electrical vehicle industry.  In China, the automobile market has been supported heavily by government subsidies. This has occurred as Chinese governmental policies support the manufacture of all electric vehicles including busses to reduce the environmental effects of pollution.  The Chinese government requires that electrical vehicles represent a portion of sales for all manufacturers, and the subsidizing of electric batteries further encourages manufacturers to produce electric vehicles. The aggressive pursuit of electric vehicles by China has occurred as Europe has begun funding electric battery production for manufacturers, so as not to be fully reliant on other manufacturing countries as this market continues to develop.  The lack of governmental subsidies for U.S. manufacturers and tariffs enforced on U.S. automobile imports are encouraging U.S. manufacturers to build production facilities, not only in the U.S., but, also, in China, to avoid these steep increases in costs as they seek to meet the demands of a quickly growing market. Tesla, the largest manufacturer of electrical vehicles in the U.S. is building a gigafactory in Shanghai that is expected to open in late 2019, and will have an annual production capacity of 500,000 vehicles (Tanaka, 2019).  It will be one of the first manufacturing facilities that is wholly-owned, and not a joint venture as was required of automobile manufacturers in the past.  Political factors include subsidies and tax credits provided by governments that help reduce the cost of the manufacturing of these vehicles and encourage production and incentivize buyers.

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Procedure vs. Concept in Accounting Education

Dr. Fred Petro, Pepperdine University, CA

Dr. Farrell Gean, Pepperdine University, CA

Dr. Abraham Park, Pepperdine University, CA

ABSTRACT

Often in the process of teaching accounting, the concern is to cover the material in a manner so that students learn the procedure, which is usually consistent with the manner in which accounting problems are written.  Accordingly, this is acceptable with the students, since the exams  in accounting courses will also concentrate on procedure.  In addition, problems on the professional Certified Public Accounting (CPA) exam strictly  adhere to the textbook.  Therefore, teaching accounting concept may be lacking in the classroom.  The objective of this paper will be to distinguish procedure and concept in accounting education.  The very first published work on double entry bookkeeping was given to us by Luca Pacioli, a Franciscan friar in the fourteen hundreds in Italy.  Luca was not, by degree, an accountant.  Instead, he was a professor of mathematics and held the highest degree in this field.  Luca taught mathematics at the University of Saint Andrews. Luca also had knowledge in double entry bookkeeping.  He developed this knowledge further in performing bookkeeping services for the Italian merchants.  At a later time, Luca wrote his treatise…..”Summa De Arithemetica, De Divina Proportione.”  In the midst of this mathematics work,  there is a chapter devoted to double entry bookkeeping.  This became the first published work on double entry bookkeeping.  Today, Pacioli is known as the father of modern bookkeeping. Although Pacioli published the first work on double entry bookkeeping, he is not the inventor. There is evidence of double entry bookkeeping inside  the walls of the pyramids, which long preceded Pacioli.   The explanation in this chapter on the the basic accounting equation and double entry bookkeeping includes the mechanics or procedure, which is adequate for the recording, followed by account classification of accounting information.  Today, accounting textbooks have not deviated from the first published work on  double entry bookkeeping.  Debits and credits are still used in a procedural manner in which accounting information can be recorded  into respective accounts.  The chapter topics are presented with examples that  are expressed in practical format.  Problems at the end of each chapter are written with requirements that duplicate the coverage of specific topics in each chapter.   In taking the professional accounting exams, specifically the Certified Public Accountant (CPA), exam, the required number of hours of accounting courses has to be met before a candidate is allowed to sit for the exam. 

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Measurement of Disclosure Quality in Annual Reports – The Case of Czech and German Listed Companies

Dr. Patrik Svoboda, Mendel University in Brno, Czech Republic

Barbora Poskocilova, Mendel University in Brno, Czech Republic

Dr. Hana Bohusova, Mendel University in Brno, Czech Republic

ABSTRACT

The paper deals with the listed companies' financial statements compliance with selected IFRS mandatory disclosure requirements. The aim of this article is to evaluate and compare the level of annual report disclosure quality for listed companies in the European transition countries and highly developed countries. The measuring compliance with IFRS mandatory disclosure requirements uses disclosure index using dichotomous and partial compliance methods for explaining compliance in individual IAS and IFRS standards. The findings of the research could be useful to potential investors, management and other users of corporate disclosures. The main aim of financial statement is to display information on financial position and the performance of company to external users. Investors and credit providers are considered the two fundamental user groups, and to provide them with the financial information is one of the accounting missions. Disclosure of accurate, comprehensive and timely information is critical for the functioning of an efficient capital market. The quality of information presented in annual reports influences investors’ and other stakeholders’ decisions. As the main role of financial reporting is reliable transfer of information to the users in time, and effectively, managers could apply their own business knowledge to improve the effectiveness of financial statements as a mean of information transfer to potential investors and credit providers (Noroush, Hosseini, 2009).  The quality of accounting information can be measured with difficulty. One of the reasons is the fact that there is no unified definition of a financial reporting quality but there are numbers of interpretations. Research usually relies on disclosure indices to obtain a proxy for the information disclosed by companies. There are many studies concerning individual measures of disclosure quality such as the disclosure index and content analysis techniques (e.g., Marston and Shrives, 1991; 1995; Jones and Shoemaker, 1994). Others have tried to investigate all available measures of disclosure (e.g., Healy and Palepu, 2001; Beattie, McInnes and Fearnley, 2004).  The most suitable way is to evaluate the extent and content of the disclosures required by International Accounting Standards.   A lot of studies on quality of financial reporting were carried out.

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Profit Shifting Behavior and Corporate Tax Base Erosion through European Entities: The Case of the Czech Republic

Dr. Veronika Solilova, Mendel University, Brno, Czech Republic

Dr. Danuse Nerudova, Professor, Mendel University, Brno, Czech Republic

Dr. Marek Litzman, Mendel University, Brno, Czech Republic

ABSTRACT

The aim of this paper is to research the profit shifting behavior and corporate tax base erosion within the same multinational group of companies operating in the European Union. We research the pre-tax profitability of the Czech multinational entities based on the Gruber and Mutti (1991), Hines and Rice (1994) and Janský and Kokeš (2015, 2016) empirical framework. Specifically, we research “true profit” and “shifted profit” of multinational entities with the assumption that the multinational entities are more likely to shift profits if mismatches between tax systems and preferential tax treatment exist. Based on the results, profit shifting and corporate tax base erosion was proved in the area of indebtedness through the debt channels. The positive and negative effects on the profitability of the Czech entities having cross-border links were identified and proved in 22 of total 28 EU Member States. Portugal was only one country without any identification of profit shifting or corporate tax base erosion.  Generally, the Multinational Enterprises (hereinafter as MNE) have a number of ways to avoid paying taxes on profits or to decrease the overall tax burden. The existence of mismatches between corporate tax systems, preferential tax treatment, transfer pricing manipulation and mismatches between debts instruments are one of them. Based on the results of the comprehensive approach of the OECD base erosion and profit shifting (BEPS) project, those methods allow an entity to lower its total corporate tax liability and effective tax rate for the whole group. The importance of the issues is proved by the research of the OECD (2015) that estimates annual losses of 4 up to 10% of corporate income tax revenues (i.e. 100 to 240 billion USD) through base erosion and profit shifting. Therefore profit shifting and tax base erosion represent a current topic across the world countries.  Our objective is to research the profitability and indebtedness of multinational entity which belongs to the Czech MNEs group and operates in some of EU country. Our assumption is that multinational entities having similar characteristics such as size, industry, country of seat, etc. should have similar “true” profitability, but they can have different opportunities to shift profits or tax treatments resulting into the corporate tax base erosion. We researched whether the existence of associated entities or affiliates in some of EU country can help to change the profitability or indebtedness of the Czech entity.

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