Home  Journals  Economic Analysis: Theory and Practice  4(169) - 2010 February

Firm’s Credit Standing and its implications for recognition, measurement and interpretation of the liabilities in financial statements prepared in accordance with US GAAP and IFRS

Available online: 3 February 2010

Subject Heading: FINANCIAL ACCOUNT

JEL Classification: 

The paper considers credit standing effects for recognition and measurement of liabilities according to US GAAP and IFRS requirements under the fair value principle. It revisits the interpretation of the right part of the balance sheet under new regulations. The paper discovers that the firms with low credit standing show less debt in the statement of financial position than the firm with comparable debt obligations but better credit standing. The conclusion is that the recognition of liabilities at their current market value prevents using traditional financial ratios, since having identical long-term debt promises the riskier firm will have better accounting indicators of liquidity, solvency and sustainability.

Keywords: credit position, obligation, the estimate of the valid cost, the financial coefficients

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ISSN 2311-8725 (Online)
ISSN 2073-039X (Print)

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