Does IFRS 10 on Consolidated Financial Statements Abandon Accepted Economic Principles?

12 Pages Posted: 25 Apr 2014 Last revised: 6 Oct 2015

See all articles by Danny Ben-Shahar

Danny Ben-Shahar

Tel Aviv University

Eyal Sulganik

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship

Desmond Tsang

McGill University - Desautels Faculty of Management

Date Written: September 25, 2015

Abstract

The 2007 global financial crisis revealed a deficiency in the financial reporting of off-balance-sheet vehicles. To better reflect risks associated with such items, International Financial Reporting Standard (IFRS) 10 provided new principles for determining an investor’s control of an investee for the purpose of preparing consolidated financial statements. We show that an applicative example appearing under the new guidelines contradicts the conclusion drawn from widely accepted power indices: the Shapley-Shubik value and the Banzhaf index. Our study adds to the literature aiming to incorporate methodological economic thought into accounting principles.

Keywords: IFRS, power index, Shapley-Shubik, Banzhaf, consolidation, financial reporting

JEL Classification: D72, G34, M41

Suggested Citation

Ben-Shahar, Danny and Sulganik, Eyal and Tsang, Desmond, Does IFRS 10 on Consolidated Financial Statements Abandon Accepted Economic Principles? (September 25, 2015). Available at SSRN: https://ssrn.com/abstract=2427627 or http://dx.doi.org/10.2139/ssrn.2427627

Danny Ben-Shahar

Tel Aviv University ( email )

Tel Aviv
Israel

Eyal Sulganik

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship ( email )

P.O. Box 167
Herzliya, 46150
Israel
972-9-9572307 (Phone)
972-9-9568605 (Fax)

Desmond Tsang (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

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