IAS 33 Earnings per Share requires listed companies to disclose not only basic earnings per share (EPS) but also diluted EPS. It seems that there is not widespread: This post explores the objective of the approach, the reason why the IASB’s predecessor (IASC: International Accounting Standards Committee) selected it and implications for any possible changes… Continue reading What does diluted EPS measure?
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
Tell investors about your crypto
There has recently been turmoil in the world of cryptocurrencies and cryptocurrency exchanges. So, are companies disclosing enough about their holdings of cryptocurrencies and other crypto-assets? If they are not, should the IASB take any action? This post discusses the following: For brevity, in the rest of this post, I use the term cryptocurrencies to… Continue reading Tell investors about your crypto
First-time adoption of IFRS Standards: too many new exemptions?
The IASB issued IFRS 1 First-time Adoption of International Financial Reporting Standards in 2003. Under IFRS 1, entities switching to IFRS Standards must apply those standards in full, with some limited transitional modifications. The Basis for Conclusions on IFRS 1 describes the decision-making framework the IASB used in deciding what transitional modifications to include in… Continue reading First-time adoption of IFRS Standards: too many new exemptions?
The ‘cash component of revenue’: a dangerous myth?
Some academics and investors often talk about ‘the cash component of revenue’. I understand why they use this shorthand label, but it risks causing misunderstanding. In this post, I examine the following: what is the ‘cash component of revenue’? an accounting identity linking revenue and cash receipts judgement in measuring trade receivables the ‘cash component… Continue reading The ‘cash component of revenue’: a dangerous myth?
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
Those mushrooming effective date paragraphs
The IASB has a problem with effective date paragraphs. There are far too many of them and their number keeps growing. I believe it is time to find a better approach to writing these paragraphs. What does the IASB do now? When the IASB amends a standard, it also adds to that standard a paragraph… Continue reading Those mushrooming effective date paragraphs