When a verb refers to the future, some languages require explicit marking of that fact. A recent paper presents evidence that companies in countries using those languages are slow in reporting goodwill as impaired. The paper suggests that this is because speakers of those languages perceive the future as more distant than speakers of other… Continue reading Does future tense help keep goodwill alive?
The term ‘assumption’ figures prominently in some accounting standards, but can give the wrong impression. Where accounting standards refer to ‘assumptions’ The term appears in contexts where a preparer needs to make an accounting estimate. IAS defines accounting estimates as ‘monetary amounts in financial statements that are subject to measurement uncertainty’. Some IFRS standards use… Continue reading Assumptions are not just a throw-away
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
There are many myths about what deferred tax is. As a result, many companies do not understand what information about deferred tax can tell investors. Thus, companies typically present that information in a technical way that investors find difficult to understand. Consequently, most investors dismiss that information as an uninteresting technicality and they ignore it.… Continue reading Myths about Deferred tax
A recent paper looked at whether language barriers deter people from responding to IASB exposure drafts. It also discussed whether the IASB pays too little attention to comment letters from countries where the main language is very different from English. The paper “No Comment”: Language Barriers and the IASB’s Comment Letter Process, by Eduardo Flores,… Continue reading Language Barriers to commenting on IASB proposals
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?
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
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
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
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