Why do accountants define an asset using a past event? What does it mean? “As a result of past events” also appears in the definition of a liability and an obligation. I am writing rubbish, you might say, but the International Accounting Standards Board defines an asset as follows: “An asset is a present…
As a jargon technique, the International Financial Reporting Standards often choose a word and stick it onto others to invent accounting terms. The writers of IFRS 11 chose ‘joint’ from the well known accounting term ‘joint venture’ and invented five new accounting terms. “A joint arrangement is either a joint operation or a joint venture.”…
The term ‘practical expedients’ litters accounting standards on leasing and revenue recognition on both sides of the Atlantic and for once, both the Financial Accounting Standards Board and the International Accounting Standards Board agree to use the same term. A rather obscure term at that. Yet practical expedients are not defined. Some accountants know what…
Accountants have an unusual way of constructing jargon in standard costing. They take up to four common words, mostly nouns, string them together to make an accounting term and then use the initials. Their simplest variance is called Direct Material Cost Variance or DMCV. Direct is superfluous here because indirect is meaningless in this context….
Accountants call it standard costing but there is nothing standard about it at all! Standard signifies something common, but only the methodology remains standard. Accountants agree on more than one standard without agreement on how many. Some accounting textbooks say there are two types of standard, others three, and a few up to five and…
IAS1 [1] tries to describe users of financial statements but fails. They explain three types of user that are not quite identical. This makes the definition unclear. The IAS hides the most precise user in paragraph 7 as part of the definition of ‘material’, a place where one would not search for it. He or…
The very first sentence of the Conceptual Framework for Financial Reporting [1] is clear: “The Conceptual Framework for Financial Reporting (Conceptual Framework) describes the objective of, and the concepts for, general purpose financial reporting.” But Conceptual Framework only states three rather obscure ‘concepts’. Concepts of Capital, Concepts of Capital Maintenance and Measurement Concepts. That’s all!…
The IASB issued an 86 page document in 2010 called Conceptual Framework for Financial Reporting [1] which describes the objectives and concepts for general purpose financial reporting. In the second paragraph complication begins: ‘The Conceptual Framework is not a Standard. Nothing in the Conceptual Framework overrides any Standard or any requirement in a Standard.’ Or…
Would you believe that accountants, in an attempt to be open and honest, have had to define exactly what they consider to be a close member of the family? All this is part of what they call a related party. Now of course this has nothing to do with a party in the sense of…
I didn’t know it was possible to ‘ding’ financial results until I read the Wall Street Journal: “Companies use LIFO to lower their taxable income. But to do so, they also must use it for financial accounting, even though it can ding financial results.” [1] This sentence certainly has a ring to it. Not knowing…