VII. Conclusion of Part I :
1. An attempt is made to give a bird’s-eye view leading us to the present study of IFRS. The language is purposely kept a non-technical narrative with a scope for the readers to read a lot between the lines to fill up the historical details. Essentially, bookkeeping captured business transactions some 800 years back through mathematical module and we are once again through IFRS, embracing in a way a mathematical base for presentation based on what is known as fair valuation. In the next and concluding part, I propose to cover some broader macro issues and some example-based micro issues again in non-technical language.
2. While I am making more noise on mathematics when dealing with IFRS, let me share with you a story about the present financial crisis in a meeting on the Wall Street (Courtesy : Abhijit Phadnis). One person while talking in the meeting in an angered voice stated that after all, 25/5 = 5. An old man attending the meeting challenged the mathematical equation and stated that 25/5 = 14. Still more angered, the young man asks the old guy to prove. The old man comes to the board and explains his equation as under :
25/5 = 14 because
5/5 = 1
25 – 5 = 20
20/5 = 4
so, two divisions give an answer 14.
The young man got wild with this mathematical knowledge and said that 5 X 5 = 25. Prove your equation in a reverse way. The old man once again said that 5 X 14 = 25 as under :
5 x 1 = 5
5 x 4 = 20
5 + 20 = 25
The lighter vein and a bit of a smile on your face apart, the truth is mathematics is pure, but twisted mathematics can give any answer. What has happened on Wall Street and everywhere in the present situation is all-round confusion, giving rise to a crisis which has given rise to erosion in confidence, leading to depression and doom. I only sincerely hope that IFRS does not get caught by twisted mathematicians in the field of fair valuations.
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