Single adjectives for multiple accounting terms only to confuse
Accountants like multiplying and diversifying their accounting terms, no doubt to make life complicated for users and accountants themselves. This makes accounting opaque and more scientific as evidenced by the way the two accounting standard boards write their standards.
The IFRS exceed all expectations in IFRS 11 where they invent six accounting terms with similar names: joint arrangement, joint control, joint operation, joint operator, joint venture and joint venturer. This sixth term joint venturer is bad enough.
But they got tied up in knots with their seventh term, when they did not dare invent a new word in the English language: arrangementor, as in ‘joint arrangementor’ so they resorted to ‘party to a joint arrangement’. Now if this is not meant to be confusing, then what else can it be?
Prior to this standard there was the less successful use of these multiple terms with the word ‘risk’ in IFRS 7. Everyone has heard of credit risk, but probably not ‘credit risk rating grades’. And then they manage to bring into the standard: currency risk, liquidity risk, interest rate risk and market risk.
Finally, they unnecessarily exaggerate with the obscure ‘other price risk’. This is one of the terms specific to the standard which accountants have to learn. It is too obscure to guess its meaning. Here is the definition:
“…. the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices.”
Now who would have guessed that an ‘other price risk’ was based on future cash flows? Nobody!