International Accounting Standards


M

mjt

I've just started to learn the deep details and practice of IGAAP.

When starting on this IGAAP journey, it is normal to feel any (or all)
of the following:

* nauseous?

* feeling that IGAAP is really missing the whole point about
accountancy?

* misleading the investors, or anybody else who uses IGAAP
accounts?

* spotting discrimination within a standard?

* spotting inconsistencies between standards?

* excessive - and specious - complexity (presumably to keep
lawyers in jobs) at the cost of intuitive/layman users?

* a feeling that you would never want to sign a set of IGAAP
accounts, because compliance cannot possibly be true or fair?

I've had a quick look at IAS 2 (Inventories), IAS 11 (Construction
contracts) and IAS 14 (Segmental reporting) so far. In each case, I
feel that financial reporting is heading back to the antediluvian
split-hairs of the 1950s, rather than something more useful for the
2000s.

IAS 11 goes on about the need to pigeon hole a "type" of contract, to
determine which random/arbitrary procedures to apply to its numbers.
Objectively, all that is required is to apportion cost with revenue over
obligations performed, less any overwhelming losses. But that's too
simple for IAS 11. Much better, apparently, to over-complicate things
and obtain perverse results. At least, that's what it looks like. How
a lay investor could handle this is anybody's guess.

IAS 14 made me want to puke, with its obsession about geographic
segments... What the f*** is this all about? Presumably, Microsoft's
geographic segments are "In a shop", "Via a hardware provider", "In a
court" and "Over the internet and whatever". What other geographic
segments would be relevant for e-products and business services? Er..
2007... hello? Anybody there?

It gets worse. IAS 14 also decides to exclude half the costs of a
subsidiary working overseas on the (backward and antediluvian)
assumption that cross-charges for international management are somehow
irrelevant. In other words, whilst the intra-group charges would cancel
on consolidation, the results of the foreign segment would be
over-stated by *under-stating* the management/adminstrative resources
(from the parent company) required to run that subsidiary. A good view
of risk, eh?

How does this stack up against transfer pricing regulations, I wonder?


Are we really heading towards a world where we need complete accounting
systems for each of the following purposes:

* management/internal reporting ("the truth")
* financial reporting ("compliance")
* tax reporting & other regulatory reporting ("incrimination")
* listing reporting ("public relations")
* sar box ("what do you mean, 'accounting controls'?")
* environmental reporting ("global warming? Oooh that's not in
IAS3.4998/86/KMA/56 v6, so let's pretend that it doesn't exist")
* insurance proposals ("excess caution")


All I can see is Enron happening again and again and again.


Am I missing something here?




--

mjt

A supporter of http://www.taxpayersalliance.com/, fighting to stop the UK
government ripping off the UK taxpayer. Do you have a similar organisation in
your country?

Tax cuts v public services? No! Tax cuts *for* better public services.
 
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J

Jonathan Bryce

mjt said:
IAS 14 made me want to puke, with its obsession about geographic
segments... What the f*** is this all about? Presumably, Microsoft's
geographic segments are "In a shop", "Via a hardware provider", "In a
court" and "Over the internet and whatever". What other geographic
segments would be relevant for e-products and business services? Er..
2007... hello? Anybody there?
I guess the other geographic segments that might be of interest are the
currencies they sell the stuff in.
 
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M

mjt

Jonathan said:
I guess the other geographic segments that might be of interest are the
currencies they sell the stuff in.
I can see the connection for tangible products (although it is tenuous
and potentially misleading if there is a forex hedge in place).

But I cannot see the connection for services and intangible products.

This is why I think IAS 14 (and therefore all IGAAP) rests upon
antediluvian assumptions about trade and risk.

--

mjt

A supporter of http://www.taxpayersalliance.com/, fighting to stop the
government ripping off the taxpayer.

Tax cuts v public services? No! Tax cuts *for* better public services.
 

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