The off balance sheet finance solution

Article Abstract:

Financial Reporting Exposure Draft (FRED) No 4, titled 'Reporting the Substance of Transactions,' was released by the Accounting Standards Board. FRED No 4 addresses questions related to the practice of 'off balance sheet financing.' Specifically, it focuses on the nature of assets and liabilities and when these entities should be incorporated in the balance sheet. Although most of the propositions in the Exposure Draft No 49 were carried over to FRED No 4, there are two notable changes. First, a new accounting procedure for certain non-recourse finance arrangements is proposed. Second, it proffers that assets and liabilities not be offset, except in cases when there is an appropriate right of set-off involving monetary assets and liabilities. The fundamental requirement of FRED No 4 is the inclusion of the substance of the transactions of an entity in its financial reports.

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One p&l account too many

Article Abstract:

The Accounting Standards Board has revealed its plans for the statement of total recognized gains and losses (STRG&L) in its exposure draft called 'Statement of Principles for Financial Reporting' released in Nov. 1995. According to the proposal, gains and losses on assets and liabilities held on a continuing basis to allow the operations of the entity to be performed must be reported in STRG&L and not in the profit and loss (P&L) account. All other gains and losses must be reported in the P&L account, which therefore includes the results of the entity's trading operations, in addition to other gains and losses. The problem with this is that the role of the P&L account as the main statement of financial performance will be slowly and stealthily reduced. In the end, it may end up as no more than glorified trading statements.

Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation)

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