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Why is there inconsistency in accounting for liabilities in IFRS? An analysis of recognition, measurement, estimation and conservatism

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  • Richard Barker
  • Anne McGeachin

Abstract

We report that International Financial Reporting Standards (IFRS) are inconsistent with respect to the recognition and measurement of liabilities, both in the conceptual framework for financial reporting and in accounting standards themselves. We demonstrate that this arises in part because the International Accounting Standards Board (IASB) does not make a conceptual distinction between the process of measurement, which requires a currently observable measurement attribute, and the process of estimation, which is inherently subjective. The IASB employs only the logic and language of measurement, while actually requiring entities to report both measurements and estimates in financial statements. Our contribution is to identify and interpret this conceptual conflict, to demonstrate that this has particular relevance to accounting for liabilities, and to draw implications for accounting research and policy with respect to recognition, measurement and conservatism.

Suggested Citation

  • Richard Barker & Anne McGeachin, 2013. "Why is there inconsistency in accounting for liabilities in IFRS? An analysis of recognition, measurement, estimation and conservatism," Accounting and Business Research, Taylor & Francis Journals, vol. 43(6), pages 579-604, December.
    • Handle: RePEc:taf:acctbr:v:43:y:2013:i:6:p:579-604
    DOI: 10.1080/00014788.2013.834811
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    Cited by:

    1. Čičak Josip & Vašiček Davor, 2019. "Determining the Level of Accounting Conservatism through the Fuzzy Logic System," Business Systems Research, Sciendo, vol. 10(1), pages 88-101, April.
    2. David Heald & Ron Hodges, 2018. "Accounting for government guarantees: perspectives on fiscal transparency from four modes of accounting," Accounting and Business Research, Taylor & Francis Journals, vol. 48(7), pages 782-804, November.
    3. Richard Barker & Alan Teixeira, 2018. "Gaps in the IFRS Conceptual Framework," Accounting in Europe, Taylor & Francis Journals, vol. 15(2), pages 153-166, May.
    4. Yong, Kevin Ow & Lim, Chu Yeong & Tan, Pearl, 2016. "Theory and practice of the proposed conceptual framework: Evidence from the field," Advances in accounting, Elsevier, vol. 35(C), pages 62-74.

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