For a financial reporting system to be effective, it must be coherent, meaning that all its pieces must fit together based on an underlying logic. There are however certain barriers to creating such a framework and which limit the overall…

The recent adoption of IFRS in many countries, especially in the EU, has advanced the objective of achieving global convergence of financial reporting standards. There are, however, still significant differences remaining in global financial reporting, most noticeably between IFRS and…

Disclosures in the notes to a company’s financial statements and accompanying discussion provide a good source for obtaining information on the possible effect that financial reporting standards may have on the company’s financial statements. This disclosure can occur in two…

Accounting Standards Codification (ASC) 606 is the new revenue recognition standard affecting all entities getting into contracts with customers to transfer goods or services. These entities include the public, private, and non-profit entities and should be ASC 606 compliant. ASC…

In May 2014, the IASB and FASB issued converged accounting standards which aim to provide a principles-based approach to revenue recognition. The core principle behind these converged standards is that revenue is to be recognized in order to “depict the…

The IASB Conceptual Framework describes expenses as “decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions…

When assessing a company’s possible future performance, it is advisable to separate recurring items from non-recurring items. Recurring items are items of income and expense that are likely to continue in the future, while non-recurring items are those which are…

When assessing a company’s current or potential future financial performance, it is important to consider the effects of both operating and non-operating components of the income statement. For example, a company that may appear to be profitable based on the…

Both IFRS and US GAAP require a company to present its earnings per share (EPS) on the face of the income statement for net profit or loss (net income) and profit or loss (income) from continuing operations. The calculation of…

Dilutive versus Anti-dilutive Securities and Implications for EPS Calculation Dilutive securities are those financial instruments that are potentially convertible into common stock and could potentially dilute or decrease EPS due to the increase in the number of ordinary shares after…