What Are the Essential Features of a Liability?

2010 ◽  
Vol 24 (4) ◽  
pp. 623-633 ◽  
Author(s):  
Dennis Murray
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Cash Flows ◽  
Economic Benefits ◽  
Primary Objective ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Time Dimension ◽  
The Past ◽  
Definition Of

SYNOPSIS: The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are in the process of jointly re-examining their conceptual frameworks. The re-examination includes assessing the definition of a liability. The Boards’ existing liability definitions include three criteria: (1) a present obligation; (2) a past transaction or event; and (3) a probable future sacrifice of economic benefits. The Boards have recently proposed that a liability be defined as “a present obligation for which the entity is the obligor” (FASB 2008c, 2). The proposed definition mentions only one time dimension (the present). References to the past and future are omitted. This paper argues that these omissions are undesirable. Omitting a reference to the past removes the link between the definition and the tradition of historically based financial statements. More importantly, however, the failure to reference future sacrifices of economic benefits divorces the definition from the primary objective of financial reporting: to provide information about the “amount, timing and uncertainty of an entity’s future cash flows” (FASB 2008a, para. OB6). This paper offers an alternative definition that emphasizes the past and future rather than the present.

scholarly journals EVOLUTION OF THEORETICAL APPROACHES OF DEFINITION OF AN ASSET IN INTERNATIONAL FINANCIAL REPORTING STANDARDS

2019 ◽  
Vol 2019 (4) ◽  
pp. 29-41
Author(s):  
Mark BALTABEKOV ◽  
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Economic Benefits ◽  
Financial Accounting ◽  
Professional Activity ◽  
International Accounting ◽  
International Accounting Standards ◽  
Theoretical Approaches ◽  
Definition Of ◽  
International Accounting Standards Board

The author establishes a goal to analyze evolution of asset’s definition in professional activity of International Accounting Standards Board and to demonstrate the processes underlying the decision-making activities have been done by its experts. The article describes in chronological order how financial accounting experts introduced improvements on asset’s definition from one meeting to another and what kind of ideas of economic and semantic nature were used to back up those improvements. The author also sheds light on and scrutinizes a few papers adopted by International Accounting Standards Board and some other accounting bodies that provided the process of evolution of an asset’s definition with relevant concepts and ideas. The article discusses fundamental principles of financial accounting in regards of interrelations between economic benefits and an asset followed by analyzing of related doctrinal teachings of western theoreticians thereto. It was stated that most of theoreticians support the idea that asset and economic benefits are totally different phenomena and article promotes some arguments why this position is true. The author also draws a theoretical conclusion that economic benefits always flow to the entity in case of usage or selling of an asset, but these benefits are generated either in a form of economic benefits as itself or in a form of asset. The article provides a brief analysis of characteristics of a right having a potential to produce economic benefits and what consequences a new definition of an asset can have on accounting treatment in case of shifting away from accounting for physical objects and toward accounting for a right or a set of rights.

Selecting Railway Investments in 1890s America

2017 ◽  
Vol 44 (1) ◽  
pp. 77-93
Author(s):  
Joel E. Thompson
Keyword(s):  
Financial Reporting ◽  
Accounting Information ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Investment Strategies ◽  
Financial Accounting Standards Board ◽  
Accounting Data ◽  
Rational Decisions

ABSTRACT The purpose of financial reporting is to provide information to investors and creditors to help them make rational decisions (Financial Accounting Standards Board [FASB] 2010). Tracing the development of investors' methods should help with understanding the role of financial accounting. This study examines investment practices involving railways in 1890s America. As such, it furthers our knowledge about the development of investment methods and their necessary information. Moreover, it shows that as investment methods grew in sophistication, there was an enhanced demand for greater comparability in accounting data to make meaningful analyses. Competing investment strategies, largely devoid of accounting information, are also discussed.

Viewing the 1996 FAF Restructuring as Policy Making without a Formal Due Process

2002 ◽  
Vol 16 (3) ◽  
pp. 199-214 ◽  
Author(s):  
Paul B. W. Miller
Keyword(s):  
Financial Reporting ◽  
Policy Making ◽  
Due Process ◽  
Accounting Standards ◽  
Sole Source ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Perceived Threat ◽  
Financial Accounting Standards Board ◽  
Public Accounting

In 1996, a major financial reporting controversy emerged, escalated, and was resolved without substantial exposure or a formal due process. Specifically, a committee of the Financial Executives Institute (FEI) sent a letter to the chair of the Financial Accounting Foundation (FAF) asserting that the Financial Accounting Standards Board (FASB) “process is broken and in need of substantive repair.” When Securities and Exchange Commission (SEC) Chair Arthur Levitt determined that neither FAF nor public accounting leaders were dealing with the FEI proposals to his satisfaction, he acted to defeat this perceived threat to FASB's independence, focusing on the composition of the FAF. In response, the FAF trustees resisted because they viewed his intervention as a threat to FASB's independence. When the trustees did not voluntarily change, Levitt proposed reconsidering Accounting Series Release No. 150, which designates FASB as the sole source of GAAP for SEC filings. Eventually, Levitt prevailed. This paper describes this intervention as a case of policy making without a formal due process and adds to the already weighty evidence that accounting standards are political.

Impairment reversals: unbiased reporting or earnings management

2018 ◽  
Vol 26 (2) ◽  
pp. 245-271 ◽  
Author(s):  
Tongyu Cao ◽  
Hasnah Shaari ◽  
Ray Donnelly
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Reporting Standard ◽  
Accounting Standard ◽  
Content Type ◽  
Study Support ◽  
A Company

Purpose This paper aims to provide evidence that will inform the convergence debate regarding accounting standards. The authors assess the ability of impairment reversals allowed under International Accounting Standard 36 but disallowed by the Financial Accounting Standards Board to provide useful information about a company. Design/methodology/approach The authors use a sample of 182 Malaysian firms that reversed impairment charges and a matched sample of firms which chose not to reverse their impairments. Further analysis examines if reversing an impairment charge is associated with motivations for and evidence of earnings management. Findings The authors find no evidence that the reversal of an impairment charge marks a company out as managing contemporaneous earnings. However, they document evidence that firms with high levels of abnormal accruals and weak corporate governance avoid earnings decline by reversing previously recognized impairments. In addition, companies that have engaged in big baths as evidenced by high accumulated impairment balances and prior changes in top management, use impairment reversals to avoid earnings declines. Research limitations/implications The results of this study support both the informative and opportunistic hypotheses of impairment reversal reporting using Financial Reporting Standard 136. Practical implications The results also demonstrate how companies that use impairment reversals opportunistically can be identified. Originality/value The results support IASB’s approach to the reversal of impairments. They also provide novel evidence as to how companies exploit a cookie-jar reserve created by a prior big bath opportunistically.

Advancing Financial Reporting in the Age of Technology: An Interview with Robert H. Herz

2021 ◽  
Vol 18 (2) ◽  
pp. 117-124
Author(s):  
Robert H Herz ◽  
Duo Pei
Keyword(s):  
Decision Making ◽  
Big Data ◽  
Financial Reporting ◽  
Main Idea ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Reporting ◽  
Reporting Process ◽  
Part Time

ABSTRACT This paper is based on an interview on January 9, 2020, with Robert H. (Bob) Herz, the former two-term chairman of the Financial Accounting Standards Board, on how the environment for business reporting has evolved and how it may continue to evolve. Bob Herz has also held decision-making positions as a part-time member of the IASB and on the board of the SASB. In this interview, we discuss a pragmatic reporting model suited to the era of Big Data and technology. We also explain the different interests of the reporting process, including the standard-setters, preparers, auditors, and users. The main idea of this paper focuses on how to incorporate Big Data and technology into reporting models working within the current framework and needs of the stakeholders. We then outline several use cases that illustrate a refined reporting model using Big Data and technology.

Accounting for leases – lessons from COVID-19

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alan Teixeira
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Accounting Standards ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Reporting Standards ◽  
Financial Accounting Standards Board ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Setting Process

Purpose The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have given relief to lessees in response to the coronavirus (COVID-19) pandemic. However, it is not clear why any relief from the requirements in International Financial Reporting Standards (IFRS) or the Accounting Standards Codification (ASC) should be necessary. The purpose of this paper is to highlight weaknesses in how the IASB and FASB developed their leases Standards, and why those Standards are not robust enough to cope with a shock to the economic system. Design/methodology/approach The COVID-19 relief suspends some features of the leasing requirements rather than changing them. What if other economic or regulatory events cause the same circumstances to arise? Findings Have COVID-19 exposed weaknesses in the leasing standards that should have been avoided when they were developed or is COVID-19 the problem? Originality/value Analysis of actual board discussions and staff papers is unusual and provides insights into the standard-setting process.

A Perspective on the Joint IASB/FASB Exposure Draft on Accounting for Leases

2011 ◽  
Vol 25 (4) ◽  
pp. 861-871 ◽  
Author(s):  
Yuri Biondi ◽  
Robert J. Bloomfield ◽  
Jonathan C. Glover ◽  
Karim Jamal ◽  
James A. Ohlson ◽  
...  
Keyword(s):  
Balance Sheet ◽  
Accounting Standards ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Financial Accounting Standards Board ◽  
Operating Leases ◽  
Key Issues ◽  
Definition Of ◽  
The Impact ◽  
Lease Accounting

SYNOPSIS The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) recently issued a joint exposure draft on accounting for leases. This exposure draft seeks to shift lease accounting from an “ownership” model to a “right-of-use” model. Under the current ownership model, leases can be reported on balance sheet (finance leases) if certain tests are met, or off balance sheet (operating leases) if those tests are not met. The new model seeks to report all leases on the balance sheet based on the present value of lease obligations without any bright line tests, and no sharp on or off the balance sheet classifications. We are sympathetic to the standard setters' concern that the current lease standard is being manipulated improperly by managers, resulting in large amounts of debt being reported off balance sheet. We provide a discussion of current lease accounting and the proposed exposure draft. We also comment on five key issues covered by the exposure draft: the definition of a lease, the initial measurement and eventual reassessment at fair values, the accounting for lessors, the impact of lease accounting on recognition and income measurement, and classification of lease accounting elements and their impact on accounting ratios. JEL Classifications: M40.

scholarly journals Ontwikkelingen in het conceptual framework

2013 ◽  
Vol 87 (9) ◽  
pp. 355-364
Author(s):  
Dick Van Offeren ◽  
Joop Witjes ◽  
Tim Verdoes
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Statements ◽  
Financial Accounting ◽  
International Accounting ◽  
International Accounting Standards ◽  
Financial Accounting Standards Board ◽  
Reporting Framework ◽  
International Accounting Standards Board

De International Accounting Standards Board (IASB) heeft recent het conceptual framework-project als kernproject aangemerkt. Het oorspronkelijke Framework for the preparation and presentation of financial statements (framework 1989) was aan een fundamentele herziening toe. Samen met de Financial Accounting Standards Board (FASB) heeft de IASB de eerste fase van het Conceptual framework for financial reporting (framework 2010) voltooid. In deze eerste fase worden twee onderwerpen besproken. Dit zijn het doel van financiële verslaggeving en de kwalitatieve kenmerken van financiële verslaggeving. Wij bespreken deze twee onderwerpen en gaan in op de verschillen tussen het framework 2010 en het framework 1989. Wij benadrukken het verschil in toepassingsgebied van de twee frameworks. Het framework 2010 is gericht op het ruimere begrip financial reporting, financiële verslaggeving en het framework 1989 was beperkt tot financial statements, jaarrekeningen.

scholarly journals The Theoretical Defenses Of The Last In First Out Inventory Methods

2013 ◽  
Vol 12 (1) ◽  
pp. 43
Author(s):  
Peter Harris ◽  
William Stahlin
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Complete Elimination ◽  
Political Pressure ◽  
The U.S

The Last in First out Method (LIFO) is presently under severe scrutiny from the financial community which may soon culminate in its repeal as an acceptable accounting method. There are pressures from the SEC in conjunction with the International Financial Accounting Standards Board (IFRS) to standardize accounting standards worldwide. In addition, there is political pressure imposed by the U.S. administration to raise additional revenues. Both groups strongly oppose LIFO, raising a strong possibility of its complete elimination. This paper addresses the reasons defending LIFO as an acceptable accounting method strictly from a financial reporting perspective.

scholarly journals An Evaluation Of The Implementation Of Fair Value Accounting: Impact On Financial Reporting

2011 ◽  
Vol 9 (1) ◽  
Author(s):  
Karen T. Cascini ◽  
Alan DelFavero
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
The United States ◽  
Financial Accounting ◽  
Financial Assets ◽  
Financial Accounting Standards Board ◽  
Continuous Change ◽  
Fair Value Accounting ◽  
The Cost

<p class="MsoNormal" style="text-justify: inter-ideograph; text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: #0d0d0d; font-size: 10pt; mso-themecolor: text1; mso-themetint: 242;"><span style="font-family: Times New Roman;">The accounting industry is in a state of continuous change.<span style="mso-spacerun: yes;">&nbsp; </span>In the United States, the historical cost principle has traditionally been the foundation of accounting.<span style="mso-spacerun: yes;">&nbsp; </span>Until recently, assets and liabilities have been required to be recorded at their acquisition prices, with the exception of designated financial assets and financial liabilities.<span style="mso-spacerun: yes;">&nbsp; </span>However, the Financial Accounting Standards Board (FASB) has now created accounting standards that are distant from the cost principle.<span style="mso-spacerun: yes;">&nbsp; </span>Statement of Financial Accounting Standards No. 157: Fair Value Measurements, issued in September 2006 (FAS157, now codified as ASC 820) and Statement of Financial Accounting Standards No. 159: The Fair Value Option for Financial Assets and Financial Liabilities, created in February 2007 (FAS159, now ASC 825-10-25), significantly increases the viability of fair value accounting. The purpose of this paper is to illustrate the benefits and pitfalls of fair value and the corresponding affects on various stakeholders. <span style="mso-spacerun: yes;">&nbsp;&nbsp;</span></span></span></p>

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