Saying how likely something is

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

Putting the wrong kinds of numbers in P&L won’t help save the planet

Many companies will need to spend a lot of money reshaping their businesses to help save the planet. Some environmental campaigners say that companies should book all that spending as liabilities today. They argue that booking that spending today would make investors focus on that information and that investors would then put pressure on companies… Continue reading Putting the wrong kinds of numbers in P&L won’t help save the planet

Discount rates for very long maturities

A common question about discount rates is how to estimate a discount rate for assets and liabilities with very long maturities. Such a discount rate contains a term premium that cannot be based on evidence and can never be back-tested. As a result, that term premium is not really an estimate, it is just a… Continue reading Discount rates for very long maturities

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