Saying how likely something is: way forward

IFRS standards use too many different terms to say how likely it is that an event will occur. And different people using IFRS Standards interpret those terms in different ways. Those clear messages appeared in a research report issued in 2016 by the Korea Accounting Standards Board (KASB) and Australian Accounting Standards Board (AASB). I… Continue reading Saying how likely something is: way forward

Putting the wrong kinds of numbers in P&L won’t help save the planet

Many companies will need to spend a lot of money reshaping their businesses to help save the planet. Some environmental campaigners say that companies should book all that spending as liabilities today. They argue that booking that spending today would make investors focus on that information and that investors would then put pressure on companies… Continue reading Putting the wrong kinds of numbers in P&L won’t help save the planet

Equity is not a residual

People often describe equity as a residual. That description is not fully accurate and may mislead people. There are probably three reasons why some people use that description: the definition of equity includes the word residual. the total amount of reported equity is measured as a residual. the pre-2018 version of the IASB’s Conceptual Framework… Continue reading Equity is not a residual

Measurements based on future cash flows

Paragraph 6.93 of the Conceptual Framework contains a brief high-level discussion of three different central estimates of a set of estimated future cash flows: the expected value (statistical mean) the maximum amount that is more likely than not to occur (similar to statistical median) the most likely outcome (statistical mode) Papers considered by the International… Continue reading Measurements based on future cash flows

The close link between rights and obligations

The Conceptual Framework for Financial Reporting defines an asset in a way that refers to a right.1 It defines a liability in a way that refers to an obligation. The two definitions are interlinked more deeply than a superficial reading may suggest. Because one definition relies on the concept of a right, it is no… Continue reading The close link between rights and obligations