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Stocks, flows and national debt

Newspaper articles often say or imply that the national debt risks exploding if it exceeds 100% of Gross Domestic Product (GDP). Some such articles even say this more directly by talking about national debt becoming ‘larger than the economy’, by which they appear to mean ‘exceeding 100% of GDP’. Such articles rarely say why the… Continue reading Stocks, flows and national debt

Liability discount rates and liquidity

IFRS 17 Insurance Contracts requires the discount rate for insurance liabilities to reflect the characteristics of the insurance liabilities, including their liability characteristics. IFRS Accounting Standards dealing with other types of liability do not typically mention liquidity. This post explains why IFRS 17 addresses this topic. This post covers: This post discusses only the discount… Continue reading Liability discount rates and liquidity

Can a subsidiary have assets and liabilities?

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?

Holding enough capital is short hand for holding enough assets

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

What is a Conceptual Framework for?

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?

The IASB’s first 25 years

The International Accounting Standards Board (IASB) started work 25 years ago this month (in April 2001). In this post, I highlight: Work plan The IASB’s work plan from 2001 to 2021 was dominated by the following main themes: I won’t try to summarise here the IASB’s projects (large and small) that don’t fit neatly into… Continue reading The IASB’s first 25 years

Recognising revenue from sales-based royalties

One type of transaction within the scope of IFRS 15 Revenue from Contracts with Customers is licensing intellectual property to a customer in return for a royalty based on the licensee’s (future) sales. IFRS 15 sometimes requires the licensor to recognise its royalty as revenue before the licensee recognises its own related revenue. Also, estimating… Continue reading Recognising revenue from sales-based royalties

When IASC removed many options

The predecessor of the International Accounting Standards Board (the IASB) was the International Accounting Standards Committee (IASC). IASC’s early standards typically contained several options that allowed different companies to choose freely between different accounting transactions for similar transactions. E32 Comparability of Financial Statements On 1 January 1989, IASC published exposure draft E32 Comparability of Financial… Continue reading When IASC removed many options

On current cost for inventory

The IASB revised its Conceptual Framework for Financial Reporting in 2018. While the IASB was developing that revision, a few people suggested that the revised Conceptual Framework should compare historical cost and current cost in more detail. Some of them suggested (around 2013) that: In this post, I look briefly at the second of those… Continue reading On current cost for inventory