Accounting for capital instruments

Article Abstract:

Proposals of the Accounting Standards Board (ASB) for reforming financial performance reports will be easy to apply but will leave such reports less sensible. The ASB's proposals require the treatment of capital instruments with 'an obligation to transfer economic benefits' as liabilities. In effect, the proposals require all debt, including those that are convertible to equity, to be reflected in balance sheets as liabilities. This split accounting approach taken by the ASB in its proposals provides the wrong message as it allows the overriding of debt's commercial substance by its legal form. Although consistent and unsophisticated, the ASB's approach leaves UK accountancy open to attack as it does not conform to the international standard, namely the International Accounting Standards Committee's 'Financial Instruments,' or E 40.

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Deferring to the inevitable, or not

Article Abstract:

This article discusses an new accounting standard for deferred tax proposed by the Accounting Standards Board. Criticism of the partial provision method, reasons for change, and consequences of the new standard are discussed.

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It does make sense!

Article Abstract:

The author defends the Accounting Standards Board's position on self-insurance. Two provisions consistent with Financial Reporting System 12 are discussed.

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