Resumo

Conservatism is one of the critical topics in accounting theory and practice that has attracted the attention of many researchers, and in Brazil, this is no different. Four interpretations in the literature justify conservative accounting: i) contracts (debt, executive contracts); ii) corporate governance; iii) accounting laws and regulations; and iv) tax rules. The first three are already widely examined in the accounting literature, including in Brazil.

Since taxable profit in the Brazilian model depends on accounting profits, it is undeniable that accounting practices influence taxable gain. One can, with some conviction, argue that taxes motivate firms to adapt reported accounting profits to taxable profits. The increase in accounting conservatism may be due to the growing need for firms to reduce the cost of taxation. Therefore, this paper investigates whether the degree of tax aggressiveness is a determinant of accounting conservatism in Brazil.

After a conceptual discussion of accounting conservatism, differentiating conditional and unconditional conservativeness, and a thorough literature review on accounting conservatism by Brazilian academia. A literature gap was found, since the relationship between a company's degree of tax aggressiveness and its accounting conservatism behavior was not previously investigated.

To test methodologically, the Basu model was adopted, adapted with tax aggressiveness controls. In addition, the effective tax rate was used as a tax aggressiveness metric, controlling firms with high effective tax rates and low effective tax rates. The study period was from 2010 to 2019 for Brazilian firms from B3.

The findings show that there is a significant relationship between tax avoidance and conservatism. They may explain the choice of the conservative pattern to avoid the tax burden; therefore, the results of this investigation show a difference between the degree of conservatism depending on the firm's tax aggressiveness profile. It was documented that conservatism is positively and significantly correlated with the degree of firms' tax aggressiveness. In other words, it was established that firms with high effective tax rates are less likely to use conditional conservatism and vice versa.

The taxation on corporate profits can be an essential motivator for the increase in accounting conservatism. The timeliness in recognizing losses can reduce the tax burden in the short term. Companies that foresee a possible tax burden in the future are willing to use accounting conservatism to postpone the accounting gains, differing the taxation to later periods of the reduced current tax burden.

Basu, S. (1997) The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, Properties of Accounting Earnings. v. 24, n. 1, p. 3–37. Brown, W. D., He, H.; Teitel, K. (2006) Conditional Conservatism and the Value Relevance of Accounting Earnings: An International Study. European Accounting Review, v. 15, n. 4, p. 605–626. Ruch, G. W., & Taylor, G. (2015) Accounting conservatism: A review of the literature. Journal of Accounting Literature, v. 34, p. 17–38. Vale, J. P. S. D., & Nakao, S. H. (2017). Conservadorismo incondicional nas companhias aberta