Selecting a measurement basis

The additions in 2018 to the IASB’s Conceptual Framework for Financial Reporting included a table summarising what information various measurement basis provide. It seems that people have paid little attention to that table. In this post, I highlight that table, summarise its role and content, and explain why it is important.   Role of table… Continue reading Selecting a measurement basis

Equity is not a residual

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

Measurements based on future cash flows

Paragraph 6.93 of the Conceptual Framework contains a brief high-level discussion of three different central estimates of a set of estimated future cash flows: the expected value (statistical mean) the maximum amount that is more likely than not to occur (similar to statistical median) the most likely outcome (statistical mode) Papers considered by the International… Continue reading Measurements based on future cash flows

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