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?
Tag: Asset
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
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
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
We exclude many sales taxes from revenue. Is that the best approach?
For many years, it has been common practice for companies to report revenue that excludes many types of VAT (value added tax) or of sales tax. This practice continues under IFRS 15 Revenue from Contracts with Customers. IFRS 15 defines the transaction price (used as a basis for reporting revenue) as excluding ‘amounts collected on… Continue reading We exclude many sales taxes from revenue. Is that the best approach?
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’
Why has research on ‘conservatism’ told standard setters so little?
There is a vast and burgeoning academic literature on conservatism in accounting, and a slightly less flourishing literature on the somewhat related notion of accounting prudence. When I worked in standard setting, I didn’t find that literature as helpful as I had hoped. My impression is that my colleagues and other standard setters didn’t find… Continue reading Why has research on ‘conservatism’ told standard setters so little?
Saying how likely something is: research methodology
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
I can’t get excited about goodwill
Many people have strong views about whether the International Accounting Standards Board (Board) should reintroduce amortisation of goodwill. But I can’t get excited about that as a topic for standard setting now, for two reasons: I think the arguments for amortisation (with impairment) and the arguments for impairment-only are quite finely balanced. I’m not sure… Continue reading I can’t get excited about goodwill
The close link between rights and obligations
The Conceptual Framework for Financial Reporting defines an asset in a way that refers to a right.1 It defines a liability in a way that refers to an obligation. The two definitions are interlinked more deeply than a superficial reading may suggest. Because one definition relies on the concept of a right, it is no… Continue reading The close link between rights and obligations