Own credit risk

The topic of own credit risk generates perhaps more strongly held views than any other accounting topic. For example, in around 2011, the IASB was developing a discussion paper on insurance contracts. Some of us visited one of the largest insurers in the world. They knew almost nothing about the project. But they had heard… Continue reading Own credit risk

Assumptions are not just a throw-away

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

Government grants: is the answer really so easy?

When the IASB first took over from its predecessor (IASC), many Board members believed that the IASB should replace IAS 20 Government Grants and Disclosure of Government Assistance. They considered that developing a replacement would be easy. The general feeling seemed that: This post deals with the following: Overview of IAS 20 The following are… Continue reading Government grants: is the answer really so easy?

Is there such a thing as unrecognised income or expense?

The IASB’s Conceptual Framework for Financial Reporting and IFRS Standards discuss both recognised assets and liabilities and unrecognised assets and liabilities. A question that sometimes comes up whether there exists a corresponding notion of unrecognised income and expenses. Unrecognised assets and unrecognised liabilities The Conceptual Framework acknowledges that not all assets and liabilities are not… Continue reading Is there such a thing as unrecognised income or expense?

IASC’s project on discounting

The International Accounting Standards Committee (IASC) added to its work plan a project on discounting (or present value) in 1998. IASC was the predecessor of the International Accounting Standards Board (the IASB). When the IASB came into being in 2001 and took over from IASC, the IASB decided not to continue with the project. In… Continue reading IASC’s project on discounting

Why it’s hard to measure deferred tax on investments in subsidiaries

IAS 12 Income Taxes prohibits recognition of most of those deferred tax liabilities (and deferred tax assets) resulting from investments in subsidiaries. This post examines why that prohibition exists. In summary, when that prohibition applies, the parent has a deferred tax liability (or deferred tax asset). The parent must disclose the underlying ‘temporary difference’. But… Continue reading Why it’s hard to measure deferred tax on investments in subsidiaries

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

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

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

The hardest question in standard-setting?

When accounting standard-setters have to make decisions about recognition and measurement, they often face two competing claims: some people argue that investors will under-react if companies are forced to recognise something; but other people argue that investors will over-react if companies are forced to recognise that thing. Standard-setters would love to get evidence that would… Continue reading The hardest question in standard-setting?