Own credit risk

The topic of own credit risk generates perhaps more strongly held views than any other accounting topic. For example, in around 2011, the IASB was developing a discussion paper on insurance contracts. Some of us visited one of the largest insurers in the world. They knew almost nothing about the project. But they had heard… Continue reading Own credit risk

Government grants: is the answer really so easy?

When the IASB first took over from its predecessor (IASC), many Board members believed that the IASB should replace IAS 20 Government Grants and Disclosure of Government Assistance. They considered that developing a replacement would be easy. The general feeling seemed that: This post deals with the following: Overview of IAS 20 The following are… Continue reading Government grants: is the answer really so easy?

Is there such a thing as unrecognised income or expense?

The IASB’s Conceptual Framework for Financial Reporting and IFRS Standards discuss both recognised assets and liabilities and unrecognised assets and liabilities. A question that sometimes comes up whether there exists a corresponding notion of unrecognised income and expenses. Unrecognised assets and unrecognised liabilities The Conceptual Framework acknowledges that not all assets and liabilities are not… Continue reading Is there such a thing as unrecognised income or expense?

Recognition

When the IASB developed the 2018 version of its Conceptual Framework for Financial Statements (2018), it created a set of principles that it believed would provide a more coherent base for its future decisions on recognition. The post summarises how those principles differ from the recognition criteria contained in the previous (2010) version of the… Continue reading Recognition

3 myths about financial accounting

In describing how finance and accounting differ from each other as disciplines, someone recently made the following 3 statements about accounting: I agree that accounting and financing are different (though related) activities. But I disagree with all 3 of these statements about accounting, particularly as they relate to financial accounting. I suspect these statements are… Continue reading 3 myths about financial accounting

IASC’s project on discounting

The International Accounting Standards Committee (IASC) added to its work plan a project on discounting (or present value) in 1998. IASC was the predecessor of the International Accounting Standards Board (the IASB). When the IASB came into being in 2001 and took over from IASC, the IASB decided not to continue with the project. In… Continue reading IASC’s project on discounting

Help for unpacking the objective of financial reporting

Paragraphs 1.2-1.4 of the IASB’s Conceptual Framework for Financial Reporting are written so densely that some people do not succeed in unpacking what they say. To make unpacking the meaning of those paragraphs easier, the IASB staff recommended in 2017 that the IASB should add a flowchart to the Conceptual Framework. This post summarises the… Continue reading Help for unpacking the objective of financial reporting

Why it’s hard to measure deferred tax on investments in subsidiaries

IAS 12 Income Taxes prohibits recognition of most of those deferred tax liabilities (and deferred tax assets) resulting from investments in subsidiaries. This post examines why that prohibition exists. In summary, when that prohibition applies, the parent has a deferred tax liability (or deferred tax asset). The parent must disclose the underlying ‘temporary difference’. But… Continue reading Why it’s hard to measure deferred tax on investments in subsidiaries

Selecting a measurement basis

The additions in 2018 to the IASB’s Conceptual Framework for Financial Reporting included a table summarising what information various measurement basis provide. It seems that people have paid little attention to that table. In this post, I highlight that table, summarise its role and content, and explain why it is important.   Role of table… Continue reading Selecting a measurement basis

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