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SFAS No. 115 and IAS No. 25

Discuss whether U.S. GAAP under SFAS No. 115 or the requirements of IAS No. 25 are more consistent with the following concepts:
i. Conservatism
ii. Comparability
iii. Relevance
iv. Neutrality
v. Representational faithfulness
vi. Physical capital maintenance

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SFAS No. 115 discusses the treatment of debt and equity securities in financial reporting. Securities are either reported at historical cost, are marked to market or are reported at adjusted historical cost (equity method).

i. Conservatism

No, this is not consistent with conservatism because the treatment permits marking to market. This means that cost will be written up when there is a risk that it will be lower at a subsequent date. Conservatism requires that when there are alternatives, you choose the one that minimizes assets and profits. So, marking UP to market is not consistent with this principles (marking DOWN ...

Solution Summary

Your tutorial is 357 words and two references and indicates that four are not consistent and two are consistent and why.