It has become a cliché to say that accounting is the language of business. That metaphor is helpful because it emphasises that accounting conveys vital information about business. But the metaphor can be unhelpful because, although accounting is a system for conveying information, accounting lacks most features of real human languages, such as Arabic, Chinese,… Continue reading Accounting is not a language
Tag: Recognition
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
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
Saying how likely something is: research methodology
In a separate post today, I summarised research by the Korea Accounting Standards Board (KASB) and Australian Accounting Standards Board (AASB). That research looked into how preparers of financial statements and auditors interpret various terms used in IFRS Standards to denote how likely an event is. https://accountingmiscellany.com/saying-how-likely-something-is In this post, I comment on 2 aspects… Continue reading Saying how likely something is: research methodology
Saying how likely something is
IFRS standards use too many different terms to describe how likely it is that an event will occur. That is a clear conclusion of KASB Research Report No. 39 / AASB Research Report No. 2 Accounting Judgements on Terms of Likelihood in IFRS: Korea and Australia, issued in 2016 by the Korea Accounting Standards Board… Continue reading Saying how likely something is
The hardest question in standard-setting?
When accounting standard-setters have to make decisions about recognition and measurement, they often face two competing claims: some people argue that investors will under-react if companies are forced to recognise something; but other people argue that investors will over-react if companies are forced to recognise that thing. Standard-setters would love to get evidence that would… Continue reading The hardest question in standard-setting?
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