Disclosing the undisclosed risks: ED 49 uses the wrong piece of theory in the off balance sheet finance debate
Article Abstract:
Off-balance-sheet accounting, by removing assets and liabilities from companies' balance sheets, can cause the financial statements of those companies to fail to reflect the companies' true level of risk. Exposure Draft (ED) 49 is an attempt to make the financial statements of companies with off-balance-sheet assets and liabilities reflect those assets and liabilities. ED 49 requires that the substance of off-balance-sheet transactions be reflected in financial statements. However, the tests included in ED 49 may not yield a true representation of risk. ED 49's test of expected economic benefit, which is the test by which the substance is to be reflected on balance sheets, may yield the conclusion that there is no asset, which is not helpful at all in valuing off-balance-sheet transactions.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
The seductive charms of valuation: ED 51 lacks the intellectual consistency to be seriously considered as an option
Article Abstract:
Exposure Draft (ED) 51, Accounting for Fixed Assets and Revaluations, offers a regime by which specific classes of valued fixed assets would be included in corporate balance sheets. In the formation of financial reporting in the UK, the main focus has become the needs of financial statement users. However, ED 51 fails to focus on users needs by offering a system for historical cost that is confusing. ED 51 does not replace historical cost convention, but replaces it with a compromise between non-historical and historical cost accounting. ED 51 does not offer an adequate solution to developing an accounting convention to replace historic cost, which could be provided by a valuation basis for fixed assets.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
Interim statement - consolidated accounts
Article Abstract:
The Accounting Standards Board's Interim Statement - Consolidated Accounts is presented. The statement includes guidance on interpreting the Companies Acts of 1985 and 1989 as concerns consolidated accounts, stipulates the provisions covering the exclusion of a subsidiary undertaking from consolidation, and elucidates changes to Statements of Standard Accounting Practice 1 and 14.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: The bomb in the balance sheet. Brands, goodwill, and the balance sheet. Off-balance sheet financing
- Abstracts: A case for rearranging the deck chairs? SSAP 24: time to sort out the balance sheet. Primacy for the P&L account
- Abstracts: The link between resources and type of diversification: theory and evidence. Technical change, competition and vertical integration
- Abstracts: After Caparo: who takes the risk? Auditor's fate in the crucible? The Caparo case: a Victorian view
- Abstracts: A sequential signalling model of convertible debt call policy. The theory of capital structure