Financial Statement Presentation
Statement of Financial Position
The staff presented a number of proposals in respect of the statement of financial position.
- To include in the exposure draft illustrations of alternative displays of the statement of financial position (such as columnar or assets on the left and liabilities and equity on the right).
- To require total assets, total liabilities, and subtotals for short-term assets and liabilities to be presented on the face of the statement of financial position.
- To propose that a classified statement of financial position should be presented except where presentation in order of liquidity provides more relevant information.
- To propose that a classified statement of financial position must present assets and liabilities in short-term and long-term subcategories based on a fixed period of one-year.
- To drop the proposal to require disclosures on the maturities of short-term contractual assets and liabilities in the notes.
- To require cash to be presented at the entity rather than the segment level (that is, as a single balance in one of the three categories).
- To present and classify items currently termed 'cash equivalents' as short-term investments.
- To require the presentation of bank overdrafts as financing items.
Individual Board members raised concerns about the wording of the guidance on liquidity presentation, noting that it could be read that an entity in financial difficulty would be required to apply such a presentation when there should be a free choice.
The classification of assets and liabilities as long or short-term on a fixed one-year basis was noted as potentially problematic for entities with longer operating cycles.
All of the above proposals were tentatively accepted by the Board.
The Board discussed a proposal to require the statement of financial position to present separately assets and liabilities with the same nature but different measurement bases.
Board members raised concerns over the potential for excessive detail in such a presentation due to the large number of measurement bases applied under IFRS. The Board tentatively accepted a revised proposal to present assets and liabilities measured on a cost basis separately from those at current value.
In addition, the staff proposed to amend the minimum line item requirements of IAS 1 to disaggregate (for example) PP&E into three lines (property, plant, and equipment).
A number of Board members questioned whether this was essentially an XBRL issue, and others highlighted the need for some guidance on appropriate levels of aggregation in the statement of financial position. The proposal was, however, tentatively approved by a majority of Board members.
Basket transactions The staff presented three alternatives for the classification of basket transactions (being transactions that recognise or derecognise assets and liabilities classified in more than one category, for example a business combination).
- Alternative A Present in the operating category
- Alternative B Present in the category that reflects the activity that was the predominant source of these effects
- Alternative C Present in a separate section
The staff recommendation was for Alternative B but this was not generally accepted due to concerns over determining 'predominance' and the potentially distorting effect of a major acquisition on operating cash flows. The Board tentatively decided to proceed with Alternative C.
Foreign currency transaction gains and losses
The staff proposed that foreign currency gains and losses be presented in the same category as the assets or liabilities that gave rise to the gains and losses. This proposal was tentatively approved by a large majority of Board members.