• Project carried over from IASC
• Discussed at July 2001 IASB Meeting
• Discussed with SAC: July 2001
• Discussed and added to agenda at July 2001 IASB Meeting
• Discussed at October 2001 IASB Meeting
• Discussed at the January 2002 IASB Meeting
• Discussed at the February 2002 IASB Meeting
• Discussed at the March 2002 IASB Meeting
• Discussed at the April 2002 IASB Meeting
• Discussed at the May 2002 IASB Meeting
• Discussed at the June 2002 IASB Meeting
• Discussed at the July 2002 IASB Meeting
• Discussed at the September 2002 IASB Meeting
• Discussed at the October 2002 IASB Meeting
• Discussed at the December 2002 IASB Meeting
• Discussed at the February 2003 IASB Meeting Note: At this meeting, project name was changed to Income Statements from Reporting Performance.
• Discussed at the May 2003 IASB Meeting
• Discussed at the June 2003 IASB Meeting
• Discussed at the July 2003 IASB Meeting Note: At this meeting, project name was changed to Reporting Comprehensive Income.
• Discussed at the October 2003 Joint IASB-FASB Meeting
• Discussed at the March 2004 IASB Meeting
• Discussed at the October 2004 IASB Meeting (Presentation by CFA Institute)
• Discussed at the April 2005 Joint IASB-FASB Meeting
• Discussed at the May 2005 IASB Meeting
• Discussed at the June 2005 IASB Meeting

Timetable

• Click for IASB Project Timetable

Background

This project addresses broadly the issues related to the display and presentation in the financial statements of all recognised changes in assets and liabilities from transactions or other events except those related to transactions with owners as owners (sometimes called comprehensive income). Thus, it will consider items that presently are reported in the income statement, cash flow statement, and statement of changes in equity.

Currently, IAS 1, Presentation of Financial Statements, permits but does not require a single comprehensive performance statement.

This project might lead to changes to the IASB Framework in addition to an accounting standard.

Tentative Decisions to Date

• Terminology. The Board has begun to use the term 'statement of comprehensive income' rather than 'statement of performance'. This is consistent with the terminology in FASB Statement 130.
• Scope. The scope of the project includes the income statement, the cash flow statement, and the statement of changes in shareholders' equity. Financial ratios and narrative reports should be excluded from the project. However, the financial metrics currently used by users, such as EBITDA, should not be obscured.
• Single performance statement. An entity should present a single statement of all recognised income and expense items as a component of a complete set of financial statements.
• All inclusive. The statement should include the effects of all changes in net assets during the period other than transactions with owners.
• Predictive ability. The single performance statement should categories and display all income and expenses for the period in a way that enhances users' understanding of the entity's achieved performance and that assists users in forming expectations of future performance.
• No 'recycling'. Recycling of income and expense items should not be allowed, that is, items should be reported in the performance statement as income or expense only once.
• Realised vs. unrealised. Profits should not be based on a notion of realisation. The Board noted that realisation means something different in different countries. In Europe and Asia realisation refers to net profit available for distribution. However, in the United States realisation refers to capital maintenance. A critical issue in Europe would be whether 'mark to market' gains are distributable. The Board noted that distributable profits are not an accounting issue but a legal issue of countries concerned. The focus of the standard should be to provide greater transparency and useful information to the investors. Transitional provisions will include disclosures (particularly narrative) as well as possibly dual reporting.
• Operating vs. investing and financing activities. A split between (a) operating and (b) investing and financing activities is useful.
• Trading vs. holding gains. Differentiation between income/expenses arising from initial recognition of an item and income/expenses arising from remeasurements of previously recognised items is useful.
• Fair value changes. Changes in fair values of assets in a period should be split based on causes of the change, for example, value changes resulting from performance during the period, changes in economic conditions, and changes in market expectations. Some Board members raised concerns regarding the significant amount of judgement that would be required to make this split and its usefulness in helping to predict with the future. The concept was accepted but the detail will be developed at a later stage of the project.
• Changes in estimates. No changes are proposed to the IAS 8 treatment, but the difference between a change in estimate, change in accounting policy, and an error need to be more clearly defined.
• Change in accounting policy. There should be only one method of accounting for changes in accounting policy, namely restatement of prior periods, unless impractical to do so.
• Correction of errors. The distinction between fundamental errors and errors should be removed. All errors should be treated in the same way - as changes in accounting policy.
• Extraordinary items. The extraordinary item category should be abolished.
• Format of performance statement. A prescribed format and subtotals for the performance statement is needed, but management should be given freedom to specify key performance indicators by having discretion over line items provided and the sequencing of those items. Management would not be allowed to add their own subtotals. Presentation of the performance statement needs to be discussed before the detail of this principle is decided.

Proposed Format for the Statement of Comprehensive Income

Subtotals within comprehensive income (for example, 'operating profit') will be prohibited except when they are subtotals of other amounts required to be displayed on the face. The Board will consider how to report per share amounts at a future meeting.

Financial Instruments

Board deliberations focused on the display of the performance of financial instruments, specifically where to set the dividing line between the two columns envisaged for the performance statement: current performance in column 1 and revisions of past measurements in column 2:

Column 1 Income and Expenses Other than Remeasurements

Column 2 Income and Expenses Resulting from Revisions to Prior Expectations about Future Periods (Remeasurements)

Total

The two columns are a consequence of the following principle previously approved by the Board:

Income and expenses resulting from the remeasurement of an asset or liability should be reported separately. 'Remeasurement' refers to the revision of estimates embedded in the carrying values of assets and liabilities.

The principle was then discussed separately for:

• Financial assets and liabilities measured at amortised cost.
• Financial assets classified as available for sale.
• Financial assets and liabilities classified as held for trading.
• Fair value and cash flow hedges.

Financial assets and liabilities measured at amortised cost

For items measured at amortised cost, there are two performance reporting issues: interest income/expense and impairment. The staff's proposal was to have interest (as calculated under IAS 39) displayed in column 1, whilst any charge for impairment would be presented in column 2. The reason for having the latter in column 2 is that it would be interpreted as a revision to an estimate.

Although a majority of the Board supported this idea, some members expressed concern because the interest shown in column 1 would most likely include a factor covering credit risk that had been priced in the original interest rate. They felt it would seem odd that an impairment, being a revision to the original assumption about the credit risk embedded in the particular asset, would be shown in column 1, whilst the factor under revision -- the credit spread over the risk-free rate -- would be presented in column 1. After discussion, the Board agreed to the staff's proposal on the grounds that the credit risk was priced into the interest rate, not into the value of the loan.

Financial assets available for sale

The staff's proposal is that interest be presented in column 1 and any change in the fair value of the financial asset be presented in column 2. Two alternatives were discussed for measuring interest income: historical cost and fair value. The Board agreed to the general principle but decided to address the issue of measuring interest at fair value when it considers the report of the Joint Working Group on Financial Instruments.

Financial assets and liabilities held for trading

The staff's proposal is that remeasurement of fair value be recorded in column 2. There was considerable debate among the Board members on this proposition. Firstly, it was pointed out that not all assets classified as held for trading are really held for trading purposes. Derivatives are an example. The Board agreed to change the label of the category into 'financial assets and liabilities carried at fair value'.

The Board then debated whether a gain or loss on disposal of a financial asset could arise. Several Board members hold the view that recording a gain or loss for an item that is constantly remeasured to fair value is inconsistent with the notion of remeasurement. They argued that the gain or loss would show up simply because the reporting entity did not remeasure the item concerned frequently enough. They suggested the item being remeasured first before being derecognised. Upon derecognition no gain or loss would arise.

Other Board members thought that the nature of the business the reporting entity needed to be considered. They argued that if a company engaged regularly in trading activities, recording a gain or loss on disposal would be justified. The question came up whether the income should be classified as revenues or gains, but that was left open for future discussion. When the Board finally voted on the issue whether a gain or loss could be encountered on disposal (that is, recorded in column 1 rather than column 2), a slight majority of seven to six members voted against it.

Hedge accounting

Fair value hedges. The staff proposed to have all changes in fair value of both the hedged item and the hedging instrument be recorded in column 2, preferably in the same line item. The Board agreed unanimously.

Cash flow hedges. Under IAS 39, for a cash flow hedge, the gain or loss on the hedging instrument is initially recognised directly in equity. Subsequently, the amounts recognised directly in equity are included in net profit or loss in the same period or periods during which the hedged asset or liability acquisition or firm commitment or forecasted transaction affects net profit or loss (for example, when the acquired asset is depreciated or when a forecasted sale actually occurs). The result is that income or expenses on the hedging instrument is recognised in the same period as those on the hedged items. In the case of acquired assets, including the gain or loss on the hedging instrument as part of the cost basis of the acquired asset (with consequential adjustment of depreciation) is known as 'basis adjustment'.

The Board considered four alternative presentation approaches for cash flow hedges:

• Retaining the IAS 39 approach, sometimes called 'recycling with basis adjustment'.
• No recycling. This, in effect, is a prohibition of cash flow hedge accounting because the gain or loss on the hedging instrument would be recognised immediately rather than deferred in equity.
• Quasi-recycling. Under this approach, income and expenses on the hedging instrument are reported in a separate 'cash flow hedging' category in the statement of comprehensive income and are subsequently recycled within the statement of comprehensive income into the same line item in which the hedged item is reported.
• Basis adjustment. The income and expenses on hedging instruments are deferred in equity the balance sheet until the hedged item is recognised.

The Board instructed its staff to prepare a summary paper on the project that will be discussed at meetings of the Board, national standard setters, and Standards Advisory Council in September, October and November. Field visits with financial statement preparers and users are also planned.

Regarding how to proceed in this project, the Board decided that the project should move directly to an exposure draft, rather than first issuing a discussion paper. Publication of the ED is planned for first quarter 2003. Click here for a Timetable for IASB projects.

Other Items

The allocation of the unwinding of the discount on provisions was discussed. Some Board members felt this should go to column one. However, others believed that, if the operating-financing split is to be defined by reference to a net debt notion, it would need to go to column two. This issue was unresolved and will be discussed at a later meeting.

Another item discussed was the allocation on the performance statement of the difference between selling price and amount received on sales in foreign currency. While a formal vote was not taken, the Board seemed to conclude that this is s column two item to be shown in the same category as the bad debt expense (normally in administrative expenses).

Discussion at the Board's October 2002 Meeting

The Board discussed the columnar distinction (income flows vs. valuation adjustments) that is fundamental to the IASB/ASB proposed statement of comprehensive income. One Board member noted his strong objection to the proposed model, as he viewed it as institutionalising pro forma reporting. The Board directed the staff to prepare a paper based on that Board member's proposed alternative to be discussed at a future meeting.

The Board discussed the current staff proposal and answered the following presentation issues:

Some Board members expressed concern with the current labels on the columns and were clear to state that the current labels are a work-in-process and may be revised in the future. One suggestion was to have column 1 be initial measurement and column 2 to be remeasurement.

The Board also discussed where an item should be presented when it is not clear which column it should go into. The staff noted that it is discussing a predominance test (what is the item predominately made of — value change or initial measurement). The ASB staff noted that when in doubt, the staff believes the item should be recorded in column 1.

The IASB agreed that in presenting returns on plan assets all returns would be included in the "valuation adjustments" column of the performance reporting project. This would be subject to final decisions in that project. Presentation of items arising under the liability calculation would be finalised later but there appeared to be a preference to include service costs and interest costs in the "initial measurement" column with other changes going to the "valuation adjustments" column.

Discussion at the Board's December 2002 Meeting

The Board discussed a first draft of an Exposure Draft.

The Board agreed to change the title of the IFRS and proposed 'Income Statement'. One of the members noted that some principles were missing, for example, the proposal on per share amounts did not follow from the existing principles. The staff was asked to reconsider the term used for the total (perhaps 'net income' might be more appropriate than 'comprehensive income'). Also, the total column should be presented first (left), rather than last (right).

The Board discussed the following issues:

• the allocation of remeasurement between business and financing;
• the display of tax as a single number; and
• the display of subtotals and per share amounts.

Based on that discussion, the following represents the Board's tentative thinking about the format of the performance statement:

Discussion at the Board's February 2003 Meeting

Operating Performance

The staff proposed, based on discussions with the UK Accounting Standards Board, four alternative models for incorporating a notion of operating performance (column references are to the exhibit immediately above):

A. Column 2 to include some remeasurements so as to result in a total of operating profit with other remeasurements in column 3.

B. Column 2 and 3 unchanged, but a total of operating profit may be inserted into the Business section of column 2. Some remeasurements may be included within this subtotal and some excluded at the entity's discretion.

C. As for B but with a stipulation as to which items could be excluded from the operating profit subtotal.

D. As for B or C but with certain items such as foreign currency gains and losses arising on translation of net investments included below both of the business and financing categories.

The Board voted for option C (13-1). They Did not however specify what items should be excluded but would consider that at a later stage. The Board also agreed that limited field-testing could commence.

Terminology

At this meeting, project name was changed to Income Statements from Reporting Performance.

The Board asked the staff to review the terminology used, particularly how the two principal columns are labelled. This format will be discussed at future Board meetings.

Financial Institutions

Three options were considered for performance reporting by financial institutions. These were:

1. No differences from other entities.

2. The same categories as other entities but that they could be rearranged to place financing on top.

3. Different classifications from other entities in particular to distinguish operating financing from regulatory capital financing.

The Board supported approach 2 above.

Field Tests

In May 2003 the staff updated the Board on the progress of the pilot field tests conducted in the UK. The Board was not asked to make any decisions during this meeting. The Board plans to discuss this project at its June 2003 meeting.

Participants did not raise any major objections during the pilot tests, and there seemed to be a general understanding of the purpose of this standard. The preparers noted that the performance reporting standard would require a specific format for the income statement, which may not present the results in a manner consistent with an entity's business model. On the other hand, the users recognise the benefits of a single format for making comparisons between companies and across industries.

The staff presented the Board with details of some of the issues raised during the field tests:

Definition and Presentation of 'Financial' and 'Financing'

Participants expressed concerns whether financing activities should be separated, problems with the definition of financing, and practical difficulties.

Presentation of Write-downs of Accounts Receivable

Intuitively, preparers and users believe that this charge should be in a different column and different row from what the Board intends to mandate.

Presentation of Inventory Impairments

The Board did not discuss this issue.

Allocations of Tax

Many participants want to allocate the tax expense between columns (remeasurements vs. non-remeasurements).

Definition of 'Earnings'

Many participants would like to add this item, as it is a key for communication to the market.

Proposed Voluntary Early Adoption in 2005

Some participants raised concerns that if the standard is issued before 31 December 2005, an option to early adopt would hurt comparability. Conversely, some constituents wanted to change once for the adoption to IFRS and therefore wanted to adopt by 2005.

Discussion at the Board's June 2003 Meeting

Findings of Initial Field Visits

The staff and Board members noted the following major themes and issues:

• Many users and preparers asked for a single number as "the" measure of performance (like net income).
• Preparers want more flexibility to represent their company in a way that is consistent with their business.
• Concern that the proposed approach did not work for a financial institution or a conglomerate with financial activities.
• Many users see merit in the approach proposed.
• The Board has a major educational task at hand.

Latest Format of Performance Reporting Statement

Click here for an example of a Performance Reporting Statement Format that was included in the observer notes for the IASB meeting of June 2003.

Other Issues Discussed

(a) Net income and recycling. The Board agreed to retain the current model (13-1). There will be a future discussion of how this decision will affect IAS 32/39.

(b) Inventory impairments. The Board agreed (9-5) inventory impairments should be presented in the remeasurement column.

(c) Write-downs of accounts receivable. The Board agreed (8-6) that the item should be presented in the operating profit and the remeasurement column.

(d) Pensions.Some concerns have been raised regarding the interim report as the entities reported that it would be difficult to split the pension costs because they will not have the information. This issue will be discussed later. The Board agreed (12-2) to stay with the current model.

(e) Provisions. It was agreed that the initial recognition should be in column 1 (profit before remeasurements) and subsequent remeasurement in column 2 (remeasurements).

(f) Other business profit. The Board decided to retain the category of other business profit and to allow items in this category to be moved up to operating profit.

(g) Income from associates. The Board agreed (8-6) that income from associates should be presented in financial income. The Board agreed (14-0) that income from associates should be presented net of tax.

(h) Financial and financing distinction. The Board agreed to keep the distinction that interest on liabilities would be presented in financing expense while interest income from financial assets would be presented in operating. This would require an entity that switches from an overdraft to a positive cash position to track the interest income and expense. This may be an area of divergence with the FASB.

(i) Banking activities. Several Board members expressed concern that the current proposals do not address well issues related to financial institutions and conglomerates. No decisions were made.

Discussion at the Board's July 2003 Meeting

The Board discussed on the following items:

• (a) financial and financing (only industries)
• (b) tax
• (c) earnings and EPS
• (d) function vs nature
• (e) descriptors
• (f) presentation on the face of the statement

The Board agreed to remove the requirement for a business profit subtotal of 300 (vote 12-1) and allow a choice of the following two presentations (vote 10-3):

Operating profit	340
Other business profit	100
Or
Operating profit	340
Business profit before financial income	440

(b) The Board re-affirmed (vote 12-0) that the tax expenses should not be allocated and should be presented one line item

(c) The Board re-affirmed that no single figure for measuring performance or comprehensive income (a so-called 'magic number') would be defined. The Board agreed (vote 9-4) that if a number is disclosed, it would have to be reconciled with the appropriate amount on the performance statement. It was determined that only items of the financial statements could be used to calculate the numerator.

(d) The Board agreed that the choice of presenting by nature or function should be permitted and that a mix presentation should not be prohibited.

(e) The column "profit before remeasurements" will be changed to "other than remeasurements".

(f) The Board agreed (vote 7-6) that the comparative columns on the face of the income statement would be the total column only. However, comparative figures are required for all three columns in the footnotes as follows:

Total Year N-1	Total Year N	Other than Remeasurements Year N	Remeasurements Year N
xxx	xxx	xxx	xxx

Discussion at the Joint IASB-FASB Meeting October 2003

The staff gave details of significant decisions to date and where the FASB and IASB agreed.

Differences between the decisions of the two Boards include:

• Definitions of the business category where FASB staff has proposed it relates to core business. (Each entity would have to define their core business and apply it consistently.)
• Definitions of the finance category where FASB allows the inclusion of income from cash and cash equivalents only.
• FASB has an 'other' category.
• FASB is debating the inclusion of an 'other comprehensive income' category. (IASB members questioned whether this gave rise to recycling. This is still under debate at FASB.)

FASB staff noted that various IASB tentative decisions were still to be debated by FASB in particular remeasurement and disaggregation.

It was agreed to set up a joint working party to consider the project and propose a joint solution for consideration by the Boards.

Discussion at the March 2004 IASB Meeting

The staff noted the purpose of a recently formed joint working group (JWG) of the staffs of the IASB, FASB, and UK ASB is:

• to identify areas where the Boards converge and where the Boards differ between their projects on reporting financial performance,
• recommend an action plan to reduce areas where Boards' views differ, and
• develop a timetable to issue public proposals or discussion documents.

It was reported that the JWG identified two overall project goals, namely:

• Goal 1: Consistent set of required primary financial statements.
• Goal 2: Determine a basis to display the effects of the "mixed-attribute" model and whether there is value in the notion of recycling.

The staff proposed a two-phase approach as follows:

• Phase I representing those issues that may be resolved in the short-term (approximately one year) and may result in an exposure draft.
• Phase II representing those issues that require more research and deliberation and are likely to result in a discussion paper as a first step. Phase II issues either possess underlying conceptual issues requiring changes to the current model that constituents (particularly users) may perceive as far reaching or are issues for which the Boards have indicated divergent goals.

The Board members indicated that:

• They supported the project goals and sub-goals.
• They would prefer to start two projects simultaneously, one being to achieve convergence of presentation (or the form and content of financial statements) and one tackling the conceptual issues.
• There was general agreement with the staff's proposals as to whether the sub-goals can be addressed as part of the convergence or conceptual project except that sub-goal E would be part of the conceptual project.

Discussion at the October 2004 Board Meeting – Presentation from the Chartered Financial Analysts Institute

The IASB joined with the FASB to attend a presentation by two representatives from the CFA Institute. The session was educational, and no decisions were made. The presentation started with executive director of the CFA Center outlining the new structure of the CFAI, and congratulating the Boards, particularly the FASB, on the manner in which they have stuck to their principles amidst overwhelming political pressure on accounting for stock options. The CFA Institute supports the position of the FASB and is encouraging its members to lobby to ensure this position is not overruled by the US Senate.

The presentation outlined the deficiencies, from the point of view of financial analysts, of the current financial reporting model. These include that it is based primarily on historical cost not fair value, and that different items are classified in different manners (profit and loss normally classified by function while balance sheet is normally by nature). From the point of view of analysts it would be preferable if no netting were allowed, no off-balance-sheet items were allowed (if a transaction affects the current wealth of existing equity holders it should be reflected in the primary financial statements), direct cash flow statements should be required, all transactions should be classified by nature, fair value measurements should dominate, and there should be no accounting entries such as deferrals, amortisations, and recycling.

The presenters discussed a possible financial reporting model that emphasises separating cash flows, accruals, and fair value changes to show a comprehensive method by which opening balance sheet flows to the closing balance sheet.

The Board members discussed the advantages and disadvantages of such a model, asked questions about the mechanics of the model, and discussed illustrations. The CFA Institute plans to issue a publication outlining this model in more detail in early 2005.

November 2004: Performance Reporting Working Group Is Formed

In November 2004, the IASB and FASB jointly appointed a new Joint International Group on Performance Reporting to assist the boards in their joint project to establish standards for presenting, in the financial statements, information that is useful in assessing the financial performance of a business enterprise.

Discussion at the Joint IASB-FASB Meeting April 2005

At the 22 April 2004 joint Board meeting, the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) (collectively, the Boards) agreed to jointly conduct their respective projects on Performance Reporting and that the work should be performed in two segments.

The staff gave an update on the progress on the Joint International Group and noted that there had been some delays to date in setting out the necessary policies and procedures that they were expected to follow. There was some discussion amongst the Board as to the role of the JIG. It was concluded that they are not a decision maker but should be used in the consultation process by both the FASB and the IASB in forming decisions on performance reporting.

Required Financial Statements

The staff asked the Boards the following questions:

Question 1: What information should comprise a Full Set of Financial Statements?

• A statement that shows (at a point in time) balances of assets, liabilities, and equity as of the beginning of the period-referred to as a Beginning of the Period Statement of Financial Position.
• A statement that shows (at a point in time) balances of assets, liabilities, and equity as of the end of a period-referred to as the End of the Period Statement of Financial Position.
• A statement or two statements that show (for a period of time) the changes in assets and liabilities other than from transactions with owners in their capacity as owners-referred to collectively as a Statement(s) of Earnings and Comprehensive Income.
• A statement that shows (for a period of time) the changes in assets and liabilities from transactions with owners in their capacity as owners-referred to as a Statement of Changes in Equity.
• A statement that shows inflows and outflows of cash-referred to as a Statement of Cash Flows.

Question 2: Should individual Financial Statements within the Full Set of Financial Statements be shown with equal prominence to each other?

The IASB noted that there is currently a difference between IFRS and US GAAP in that under IFRS and US GAAP, certain information can be shown in the notes to the financial statements rather than in a financial statement format. However, it was agreed by the Boards unanimously that all individual statements should be shown with equal prominence.

Question 3: With regard to the Statement of Earnings and Comprehensive Income, should that information be presented as:

• (1) A single statement with a total representing all non-owner changes in financial position and no subtotal for net income or profit or loss. (The Pure Single Statement Approach);
• (2) A single statement with a total for non-owners' changes in financial position and a required subtotal called net income or profit or loss. (The Modified Single Statement Approach); or
• (3) Two separate statements broken down into a traditional Income Statement and a Statement of Other Comprehensive Income similar to that described in FASB Statement No. 130, Reporting Comprehensive Income, paragraph 22. (The Two-Statement Approach)?

There was extensive debate on this question and the following points were made:

• The staff recommended alternative (2) modified single statement approach as it provides the best layout of information for users.
• Certain Board members preferred alternative (1) pure single statement approach but recognised that such an option would require a greater degree of modifications in existing standards and create issues for items such as recycling which are to be dealt with in Segment B of the project.
• Some FASB members were strongly in favour of the pure single statement and felt that the issues to be debated in Segment B should be addressed earlier.
• There was concern that certain items that were currently presented outside of the statement of income (e.g. the Statement of Total Recognised Gains and Losses for UK companies) were given less prominence in considerations of analysts. Therefore, a single comprehensive statement of income was seen as a positive step to improved financial reporting.
• The IASB members noted that alternative (1), which would eliminate the concept of net income, would be a major issue for IFRS reporters, and that the alternative (2) modified single statement approach offered the best solution.

Question 4: Based on the Boards' decisions on Questions 1 through 3, at this time, do the Boards prefer to make the proposed revision by amending their existing guidance rather than create a new replacement standard?

The Boards debated the merits of issuing a consultation document prior to an exposure draft on the above changes. It was stated that some of the proposals are a major change and therefore discussions would be required in order to persuade interested parties as to the merits of the Boards' recommendations. IASB members specifically noted that European and other IFRS adopters would be resistant to these changes if they felt the IASB are merely falling in line with the FASB.

A vote was taken and the Boards opted (by majority) for issue of an Exposure Draft (without discussion paper) with the proviso that round table discussions would be held.

Comparative Financial Statements

The staff introduced this topic and the need to eliminate existing differences between IFRS and US GAAP relating to the requirements for presenting comparative financial statements.

The staff asked the Boards the following questions:

Question 1: Do the Boards agree with the staff recommendation to require comparative financial information for all entities, and to limit the required information to two annual periods (the current and prior annual period)?

There was some debate regarding the SEC's rule for 3 years of financial information. The Boards voted (by majority) with the staff recommendation to require comparative financial information for two annual periods. Clarification was made (with reference to the full set of financial statements) that this would include 3 balance sheets and 2 sets of period statements (earnings and comprehensive income, cash flows and changes in equity).

Question 2: Do the Boards agree with the staff recommendation that the presentation of financial information by those entities that elect to provide information for annual periods beyond the required minimum should be encouraged but not be required?

The Boards determined that provision of financial information beyond the required two annual periods should not be encouraged. The rationale was that most jurisdictions (including standard setters, securities regulators, and stock exchanges) currently require comparative financial information for the prior annual period and, thus, would most efficiently achieve convergence. While true convergence may not be achieved for public entities, convergence will be achieved at least at the standard setters' level.

The staff asked the Boards to consider specific questions noted below. The staff acknowledged that the Boards may have felt that certain questions had been debated before but the staff felt that clarity was required.

1. Is the Boards' objective to develop a single standard that would apply broadly to all entities?

The Boards agreed unanimously that this is their objective.

2. Do Board members agree that they should first develop a standard that would apply to entities other than financial institutions, and then consider the application of such a standard to financial institutions?

The Boards agreed unanimously that this is the best approach.

3. Do Board members agree with the staffs' approach regarding interim financial statements and notes to financial statements?

Because the staff believes the scope of this project never included fundamental reconsideration of interim reporting requirements or note disclosures, the staff plans to change existing reporting requirements only as needed through consequential amendments made necessary by Board decisions. The Boards agreed (by majority) with the staff.

4. Should the scope of this project include a comprehensive reconsideration of FASB Statement 95, Statement of Cash Flows, and IAS 7, Cash Flow Statements, including whether to require a particular method and presentation of the cash flow statement?

The Boards agreed unanimously that this question should be addressed in Segment B of this project.

5. Do the Boards believe that there are any additional topics that should be added to either Segment A or Segment B? If so, what are these additional topics and should they be addressed in Segment A or Segment B?

An IASB Board member stated that a statement of returns to shareholders should be considered as an additional part of the full financial statements. The Boards also highlighted that additional input from the financial services sector (specifically buy side companies) would be welcomed on the JIG.

6. Timing and Staffing Issues

The Boards agreed (by majority) with the staff proposal to continue with one joint staff team that would complete Segment A of the project through Board deliberations and working toward issuing an Exposure Draft addressing Segment A only. After that the staff will work toward the issuance of a public discussion document on only Segment B issues.

Discussed at the May 2005 IASB Meeting

At the 21 April 2005 joint Board meeting, the FASB and the IASB agreed that non-owner changes in net assets (the Statement of Earnings and Comprehensive Income) should be presented in a single statement with a total for non-owner changes in net assets (often referred to as 'comprehensive income') and a required subtotal called 'net income' or 'profit or loss'.

The staff asked the Board to consider the effect of this decision on the presentation of per-share measures, namely earnings per share (EPS) and comprehensive income per share (CPS). Specifically, the Board was asked whether they would require a measure of CPS? The Board debated this issue extensively with a number of Board members expressing a desire to ultimately eliminate IAS 33 as a way of de-emphasising EPS in financial reporting. The Board agreed to retain IAS 33 as presently drafted for purposes of completing the performance reporting project. Consequently, CPS would be a measure that is permissible but not required. In answering a subsequent question posed by the staff, the Board agreed that should CPS be disclosed, this would be in the notes to the financial statements and the disclosure provisions would apply that require reconciliation of the numerator used and a line item that is reported in the income statement.

Discussed at the June 2005 IASB Meeting

The Board was updated on the work of the Joint International Group on Performance Reporting (JIG). After discussing the structure of the project (the issues within Segments A and B) in the context of how to proceed, the Board tentatively decided that the staff should commence work on an exposure draft dealing with Segment A issues only. That exposure draft would consist of a detailed preamble designed to communicate clearly, the intentions of the Board on issues such as the single statement and the fact that there would be no emphasis placed on the comprehensive income amount in Segment A (as opposed to net profit). While preparing the exposure draft, the FASB would be consulted about how best to proceed and if it is decided that a discussion paper is necessary, the exposure draft would be converted into a discussion paper format.