People often argue that banks’ cash flow statements do not provide useful information. In this post, I explore whether a cash flow statement can provide useful information about most banks’ core operations: deposit-taking and lending. I discuss below: Basic example I will start with a simple example, example 1. On 2 January 20X1, bank A:… Continue reading Cash flow statements for banks, insurers and investment funds
Tag: Presentation
We call too many things ‘intangible assets’
The definition of an intangible asset in IAS 38 Intangible Assets is too broad, in my view. The assets it captures do not form a single natural class of assets that all have a common feature. As a result, IAS 38 may not provide the most useful information about every type of asset captured by… Continue reading We call too many things ‘intangible assets’
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
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?
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?
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
Did a dead man write IAS 1?
There is a strange but persistent rumour that IAS 1 Presentation of Financial Statements was written by Sir Henry Benson (later Lord Benson), the first chairman of the IASB’s predecessor, the International Accounting Standards Committee (IASC). If true, this would have been a remarkable feat. Benson’s term as IASC chairman finished in 1976 and he… Continue reading Did a dead man write IAS 1?