Financial statement presentation – sweep issues
The Boards discussed two sweep issues identified by the staff while preparing the pre-ballot draft of the forthcoming exposure draft.
Sweep issues: IFRIC issues related to the requirements for comparative information
Through the IFRIC the Boards have become aware that a diversity of views exists as to the requirements for comparative information when an entity provides individual financial statements beyond the minimum comparative information requirements. Those issues are a result, at least in part, of guidance added as part of the 2007 revision of IAS 1.
The Boards discussed the issue in the context of the following example. An entity provides selected financial statements in addition to those required as a minimum within a complete set of financial statements prepared in accordance with IFRSs. For example, a calendar year end entity provides the following financial statements for its year ended 31 December 2009:
- Statements of financial position as at 31 December 2009 and 2008
- Statements of each of the following for the years 2009, 2008, and 2007 (one more than the minimum required by IAS 1):
- (i) Statement of comprehensive income
- (ii) Statement of changes in equity
- (iii) Statement of cash flows
With little discussion, the Boards agreed that exposure draft should clarify that only the minimum comparative periods are required for a 'complete set of financial statements'. Presenting selected additional comparative information is acceptable, provided it is not misleading. That is, the additional financial statements must be prepared in accordance with current IFRSs and presented with equal prominence as the other periods - but a 'complete set' is not required (in the example above, a 31 December 2007 statement of financial position is not required).
Opening statement of financial position
The Boards addressed the issue of what should be considered as the 'statement of financial position for the earliest comparative period presented' when additional selected comparative financial statements are presented for the comparative period.
Using the example from the previous issue, given that the entity has presented annual statements of comprehensive income, changes in equity and cash flows for the three years ended 31 December 2009, 2008, and 2007, and has presented two statements of financial position as at 31 December 2009 and 2008, what should be the 'statement of financial position for the beginning of the earliest comparative period'?
The Boards had a lengthy discussion, during which various alternatives were explored and modified or rejected. The two Boards noted that what was 'required' and what was 'optional' would often be driven, for publicly-listed companies at least, by securities market and other regulatory requirements. To comply with local regulatory requirements, an entity might have to provide information not required for the financial statements to 'comply with IFRS'. That additional information would be subject to the regulator's requirements, but would not ordinarily affect the statement of compliance with IFRSs.
The Boards finally agreed that, for the example under discussion, the 'statement of financial position for the beginning of the earliest comparative period' would be that of 1 January 2008. In addition, the footnote disclosure for that statement would not be required to claim compliance with IFRS.
The Boards discussed whether the January 1 2008 statement was the same as the statement prepared as of 31 December 2007. The Board agreed that it was, subject to the application of any retrospective adjustments for accounting policies adopted on 1 January 2008. Significantly, the Boards agreed that any adjustments to the statement of financial position between 31 December 2007 and 1 January 2008 should be explained in the footnotes.
Presentation of OCI items related to a discontinued operation
In October 2009, the Boards agreed that an entity must identify and indicate in the statement of comprehensive income whether an item of other comprehensive income relates to (or will relate to) an operating, investing, or financing activity. The staff noted that the requirement should logically be extended to include items related to a discontinued operation.
The Boards agreed with the staff and requested that the forthcoming exposure draft clarify this proposed requirement.