German accounting rules value assets and liabilities asymmetrically
and thus lead to grossly distorted balance sheets. In the interwar
debate on a reform of disclosure regulation, financial experts
considered the (undisclosed) tax balance sheet, which had to be
drawn up separately for the corporate tax assessment, as a paradigm
for adequate financial disclosure. However, due to tax secrecy thay
were barred from analyzing tax documents. Using archival evidence,
we analyze tax balance sheets from ...
German accounting rules value assets and liabilities asymmetrically
and thus lead to grossly distorted balance sheets. In the interwar
debate on a reform of disclosure regulation, financial experts
considered the (undisclosed) tax balance sheet, which had to be
drawn up separately for the corporate tax assessment, as a paradigm
for adequate financial disclosure. However, due to tax secrecy thay
were barred from analyzing tax documents. Using archival evidence,
we analyze tax balance sheets from which the reliability of disclosed
balance sheets of the interwar period can be assessed. It emerges
that companies overstated their profits in the middand late 1920s,
but grossly understated them in the Nazi economy.
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