The International Accounting Standards Board (IASB) started work 25 years ago this month (in April 2001). In this post, I highlight: Work plan The IASB’s work plan from 2001 to 2021 was dominated by the following main themes: I won’t try to summarise here the IASB’s projects (large and small) that don’t fit neatly into… Continue reading The IASB’s first 25 years
Tag: Disclosure
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
Defining contingent liabilities
IAS 37 Provisions, Contingent Liabilities and Contingent Assets contains an unusual definition of contingent liabilities. The definition covers 3 different items that do not form a natural class, and it also differs from how people (other than people applying IAS 37) commonly think about contingent liabilities. This post explains how IAS 37 ended up having… Continue reading Defining contingent liabilities
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?
Make the cash flow statement easier to understand
The indirect cash flow statement starts with a profit number and then reverses out the effects of accrual accounting to get to operating cash flow. That style of presentation is very difficult for non-accountants to understand. For example, by adding back accrued expenses (not yet paid), it makes accrued expenses look like an operating cash… Continue reading Make the cash flow statement easier to understand
Should ‘significant influence’ change measurement? Really?
IFRS accounting standards require companies to measure investments in their associates using the equity method. An investor’s associate is a company over which the investor has ‘significant influence’. Over the years, many questions have arisen about the equity method. In my view, one reason for so many questions is that the equity method applies to… Continue reading Should ‘significant influence’ change measurement? Really?
Liability or equity?
I have submitted a comment letter to the IASB on 2 aspects of its Exposure Draft Financial Instruments with Characteristics of Equity, available at IFRS – Exposure Draft and comment letters: Financial Instruments with Characteristics of Equity—Proposed amendments to IAS 32, IFRS 7 and IAS 1 The comment deadline is 26 March 2024. The text… Continue reading Liability or equity?
Does it matter that companies don’t consolidate pension funds?
Some people wonder why companies present pension liabilities net of the related plan assets. They suggest that instead companies should consolidate their pension plans. People making that suggestion think it would lead to companies presenting pension liabilities (gross) separately from the plan assets. This post explains why introducing a requirement to consolidate pension plans would… Continue reading Does it matter that companies don’t consolidate pension funds?