Lessons for IFRS reporting from History.
I am a keen student of history and I came across this letter in our local Antique Market the other day. Please right click to read it in a new window.
It's quite interesting and was found in a lawyer's papers. I have deleted the name of the signatory. Nothing really changes, the writer is asking, indeed demanding, an extension of a few "weaks"(his spelling) to pay off the debt. Does a few more weeks make you weaker? And "you should say nothing of" the interest! An interesting approach - take the offensive?
What has this to do with IFRS? Have I gone completely loopy this time do you think?
It's a teaser of course. Debt renegotiation is a very important matter during the "credit crisis". Check out IAS 1 for the classification of debt as short or long term. You may be surprised about how many situations you think can be long term debt classification might have to be classified as short term. Check out !AS 1. Be sure to refer to the latest version and not the version in the Exposure Draft last April. I will discuss the issue later in the week.
Why the fuss over $130? Of course a dollar was worth more, even Canadian dollars in 1876.
It is not easy to do comparatives. I found no information for Canada. However you can get some information on the Measuring Worth Site. If one looks at consumer prices the $130 is a little over $2,500 now (most inflation in the post World War II period). If you look at other measures such as the relative unskilled wage the value of $130 (US dollars) would be about $18,000. I suspect the data would be similar in Canada.
Please read IAS 1 (NOT IFRS1 - there is a big difference) to find out the issues related to year end classification of debt. There are also a lot of other financial statement disclosure matters in that standard also.
Stay tuned. I am also doing a lot of work on moving this blog - please stay tuned. There will be a very concentrated set of articles when that happens.
I hope you enjoyed the retrospective look.
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