Well, yes Mr. Sage, and yet, but….

Richard Murphy says:
November 2 2021 at 5:09 pm
Jonathan

You ask a question that is, in accounting terms, not difficult to answer. The fact is that estimation of liabilities arising at least 30 years hence is entirely normal within accounting. For example, every pension fund includes estimates of liabilities arising much further into the future than that. Despite that, pension fund accounts are customarily incorporated into the accounts of their sponsoring employer.

In addition, from the moment that a nuclear power plant is commissioned a provision is created for the cost of its decommissioning, the liability for which might last for centuries.

And, in another sector, it is normal for the environmental costs of making good the damaged created by mining and other types of mineral extraction to be included in accounts even though, again, these might be incurred a long time in the future.

So, how do we do it? We simply use best estimates based upon current knowledge, current technology, and currently anticipated time scales for the liabilities arising. Is it perfect? No, of course it is not. That, I entirely accept. But what I am proposing is no more likely to be wrong, if best efforts are used, than any of the above noted provisions.

I should add that auditors are also entirely used to expressing opinion on these provisions, so again, nothing that I’m asking them to do is beyond their current experience.

Everyone of those costs – and benefits – being subject to discounting. Apparently the thing we’re not allowed to use any more.

6 thoughts on “Well, yes Mr. Sage, and yet, but….”

  1. I wouldn’t trust an accountant (even a very good one, let alone Spud) to value a pension fund. They use the values provided to them by the scheme actuary.

  2. Strangely when anyone applies those principles to Public Sector pension deficits (for example) and points out the variation in calculations they are immediately a ‘neoliberal’ or ‘troll’ and sent packing in short order.

    The primary problem with his contention being that his ‘3’ stage carbon classification is quite literally the equivalent of putting a dartboard up or using a random number generator. It has no methodology behind it of any kind.

  3. Also Tim – he appears to be worried that democracy is coming to an end – could be some crazed statements worthy of fisking in there tomorrow morning.

    ‘Matters are getting worse, albeit maybe not at quite the same rate as they were in 202o, as yet. But the trend is very much the same, and the start point worse.

    Anyone who suggests that an economy facing this scenario is beginning a new era of optimism is talking nonsense.

    I suggest that the likelihood of recession is uncomfortably high.’

    From another verbal bout of drivel

    ‘Will the young do that?

    Why will they? What is the tipping point? Or have the right succeeded in dropping democratic degradation so steadily into our systems that people, like boiling lobsters, don’t notice what is happening until too late?

    I am worried.’

    And from another post:

    ‘This is worrying. A year in Biden is fading, largely because his own Senators will not support his actions in the Senate. He cannot get his programmes through. And Virginia has moved back to Trump as a result.

    Trump could stand again in 2024. There are three threats.

    First to US democracy, which will be hollowed out for good.

    Second, to world peace, as Trump seeks to take on China.

    Third, to the hope of tackling climate change, which Trump denies is happening.

    I have but one word of advice to offer: worry.

    The US voter may yet opt for Armageddon.’

  4. @van patten “Second, to world peace, as Trump seeks to take on China.” that’s a new one for him – the recession is just round the corner, the fascists are knocking on the door , the worlds going to burst into flames – thats old hat for him. I’m wondering what happened to the final piece of the quartet of doom – we’re all going die from coronavirus ? Spud’s obviously turning into private Frazier.

  5. Isn’t there a problem here with his examples as they are examples of the matching principle where we are matching specific costs to the resultant revenues.
    The ‘3’ stage carbon he’s talking about and associated costs are not directly related to the revenue generated so the examples don’t hold up

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