Will accounting for bonds be affected by the new Accounting Standards Update? Ex

Question

Will accounting for bonds be affected by the new Accounting Standards Update? Explain.

#2) As you know, the FASB has been working with the IASB to narrow the differences between U.S. GAAP and IFRS, to foster the goal of someday having accounting standards around the world that result in comparable, useful financial information.

The differing concepts in IAS 27 and SIC-12 and uncertainties surrounding the consolidation requirements in both documents have caused divergence in practice and therefore reduced comparability of consolidated financial statements. The recent financial crisis has also highlighted a need for better disclosures about the reporting entity’s involvement with special purpose entities.

In addition, many constituents have asked the IASB to consider whether investment entities should be excluded from the scope of the consolidation standards. In light of those concerns, the IASB has initiated a project to revise the scope, accounting and disclosure requirements for consolidated financial statements.

What two projects have been set up to address this? Do you think this is an appropriate route to take? Why or why not?

Explanation / Answer

#1) Yes accounting for bonds will be affected by the new accounting standards update as Accounmting for bonds payable is done Price of bonds is equals to present value of bond plus present value of interest payments.Interest to be paid is determined by the coupon rate and present value calculation is based on market interest rate.

#2) As the two projects have been prepared using different accounting standards so the reliablity of the consolidated financial statement is less and the stakeholders cannot rely on that.

NO this is not an appropriate route to take i.e to revise the scope,accounting and disclosure requirement for consolidated financial statements instead they should prepare financial statement of both the projects using same accounting standard,providing same platform for comparison.

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