People often talk about how much capital a company ‘holds’ and about how much capital the company needs to ‘hold’. Talking about a company’s capital can be a convenient shorthand, but runs the risk of confusion. That risk arises because companies hold assets but do not ‘hold’ capital. Also, measures of capital are simplistic and… Continue reading Holding enough capital is short hand for holding enough assets
Tag: Mismatch
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
Recognition
When the IASB developed the 2018 version of its Conceptual Framework for Financial Statements (2018), it created a set of principles that it believed would provide a more coherent base for its future decisions on recognition. The post summarises how those principles differ from the recognition criteria contained in the previous (2010) version of the… Continue reading Recognition
3 myths about financial accounting
In describing how finance and accounting differ from each other as disciplines, someone recently made the following 3 statements about accounting: I agree that accounting and financing are different (though related) activities. But I disagree with all 3 of these statements about accounting, particularly as they relate to financial accounting. I suspect these statements are… Continue reading 3 myths about financial accounting
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
Emission trading schemes: a fresh look
The most difficult question in accounting for emission trading schemes is deciding what to do with emission trading certificates received free of charge. Does the recipient have a liability on day 1? If not, should it recognise an immediate gain? Previous answers to this question have been unconvincing because they did not reflect the nature… Continue reading Emission trading schemes: a fresh look