Financial Statement Presentation
The statement of comprehensive income
The Board briefly considered the proposal to present a single statement of comprehensive income. The Board concluded that this topic would be addressed later this week as part of another project (proposed amendments to IAS 1) in response to a similar expected FASB proposal (as part of its financial instruments project).
The Board agreed to retain the requirement to identify and indicate on the statement of comprehensive income the category or section to which each item of other comprehensive income (OCI) (apart from a foreign currency translation adjustment on a consolidated subsidiary and proportionately consolidated joint ventures) related. The Board also discussed implications of this decision on some items in OCI (for example, cash flow hedge reserves) as it could mean that they might be split between the respective sections.
Income tax allocation and presentation
The Board agreed to propose in the forthcoming ED to retain the existing requirements on intraperiod tax allocation in the statement of comprehensive income. This may result in an entity presenting income tax expense or benefit in the discontinued operations and OCI sections in addition to determining the income tax effect for continuing operations (the income tax section).
The Board also tentatively agreed that existing requirement to disclose the amount allocated to each component of OCI should be retained. Nonetheless, the staff noted that this issue might be reconsidered following the decision on a single statement of comprehensive income later in the week.
Finally, the Board agreed that an entity should present current and deferred income tax assets and liabilities recognised and related cash flows in an income tax section on the statement of financial position and statement of cash flows.
Disaggregation by Function and Nature
The Board continued its discussions on the level of disaggregation in the financial statements. This was an educational session, and no formal decisions were taken.
The Board discussed a disaggregation principle that would require an entity to consider disaggregation by function, nature, and measurement basis in financial statements as a whole in a manner that provided transparency to that entity's business model and best representation how the entity used its resources to generate income and cash flows. This disaggregation principle would then apply not only to the statement of comprehensive income but also to the statement of financial position and the statement of cash flows.
Whilst the majority of the Board was contended with the overall direction of embodied in that principle, they expressed their concerns on how the principle was articulated. Some Board members were particularly concerned that the wording was too vague and a more rigorous wording would be required to ensure discipline to provide a proper level of consistency and comparability. Otherwise, they feared, it would give the preparers a carte blanche in determining the level of disaggregation. Especially, the representatives of analysts among the Board members were concerned that applying the proposed principle could lead to essential information not being disclosed. On the other hand, some other Board members felt that some level of flexibility was necessary and it reflected different characteristics of different industries (for example, financial institutions).
On balance, the Board saw merit in the proposed principle but asked the staff to reformulate it, articulate more clearly the objectives and accompany the principle with additional application guidance and examples how that principle might impact the presentation of primary financial statements. The Board will reconsider this principle on the joint meeting with the FASB next week.
The Board considered where in the financial statements the disaggregated information should be presented. Most of the Board members were concerned that the level of disaggregation would lead to the primary financial statement being too cluttered with data leading to reduction in relevance and understandability.
Whilst most of the Board members concurred with the proposal to present disaggregated information on the face of the financial statements for entities with one reportable segment and to present that information in its segment note for an entity with more than one reportable segment, they were concerned that segment note was based on a different measurement basis (non GAAP numbers). The presentation of disaggregated information would be reconsidered at the October joint meeting with the FASB. Nonetheless, the Board thought that the forthcoming ED might ask the question whether segment reporting note should be amended to reflect the GAAP measures.