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
Category: Conceptual Framework
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?
Real options and intangible assets
When the IASB set its initial agenda in 2001, the IASB decided to do no further work on a project on discounting (or present value). The project had begun under the IASB’s predecessor (the International Accounting Standards Committee, IASC). In this post, I: What are real options? Many people are familiar with financial options: explicit… Continue reading Real options and intangible assets
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
FX on eliminated intragroup balances
The IFRS Interpretations Committee issued in September 2025 a Tentative Agenda Decision Classification of a Foreign Exchange Difference from an Intragroup Monetary Liability (or Asset). The Tentative Agenda Decision is open for comment until 25 November 2025. It is available at IFRS – Tentative Agenda Decision and comment letters: Classification of a Foreign Exchange Difference… Continue reading FX on eliminated intragroup balances
Deferred tax on intragroup inventory transfers
One case when IAS 12 Income Taxes requires companies to recognise a deferred tax asset is on unrealised intragroup profits on inventory. This arises when: Recognising this deferred tax asset is uncontroversial if the buying company and selling company are taxed at the same rate, but views are more mixed if rates differ. IAS 12… Continue reading Deferred tax on intragroup inventory transfers
What is income?
Some people wonder whether the IASB’s Conceptual Framework defines ‘income’ in a useful way. This post explores 2 aspects of that issue: Many of the points discussed in this post relate just as much to expense as to income. To keep the discussion brief, I discuss only income. Is ‘income’ a debit or a credit?… Continue reading What is income?
We call too many things ‘intangible assets’
The definition of an intangible asset in IAS 38 Intangible Assets is too broad, in my view. The assets it captures do not form a single natural class of assets that all have a common feature. As a result, IAS 38 may not provide the most useful information about every type of asset captured by… Continue reading We call too many things ‘intangible assets’