Accounting Miscellany

Consolidated financial statements report the assets and liabilities, income and expenses, and equity of a group as if the group were a single entity. A group is a parent and its subsidiaries (the entities controlled by the parent). Obviously, a parent and its subsidiaries are not a single entity, even though consolidated financial statements report… Continue reading Can a subsidiary have assets and liabilities?

People often talk about how much capital a company ‘holds’ and about how much capital the company needs to ‘hold’. Talking about a company’s capital can be a convenient shorthand, but runs the risk of confusion. That risk arises because companies hold assets but do not ‘hold’ capital. Also, measures of capital are simplistic and… Continue reading Holding enough capital is short hand for holding enough assets

Someone suggested to me once that conceptual frameworks are solely (or perhaps mainly) strategic tools that accounting standard setters use: I do not believe that is the main motivation for standard setters. It may well not be a motivation at all.  Is there any alternative? It is not fruitful to discuss the purpose of a… Continue reading What is a Conceptual Framework for?