Broadly defined, performance is the relationship of the income and expenses of an entity. Traditionally entities reported their performance in an income statement. Under IAS 1(2007)
, entities report performance either in a single statement of comprehensive income (with a subtotal for traditional profit or loss) or in two statements, an income statement and a statement of comprehensive income. IAS 1 allows flexibility in formats of, and groupings and subtotals in, those statements. The IASB and the FASB have a joint Project on Financial Statement Presentation
that encompasses performance reporting. In October 2008, they published a Discussion Paper
proposing the structure and format of an entity's financial statements. The new PAAinE discussion paper acknowledges the joint IASB-FASB project but notes that:
There are a number of fundamental issues about the presentation of financial performance information that that discussion paper does not address. Those issues include:
- should the net income line be retained?
- (if it should be retained), what should the basis be for determining whether something is within net income or outside net income?
- what role should recycling have in performance reporting?
The PAAinE paper observes that 'there is a clear need for one or more key lines to provide a basis for communication to the market and as a starting point for analysis and comparison'. The paper discusses the attributes such a key line needs to have if it is to fulfil this purpose. 'It is therefore important that items of income, expense, gains, and losses are disaggregated, grouped, and aggregated in a way that ensures that the most useful key lines are presented.' The paper notes that whether recycling is needed also depends on the aggregation/disaggregation model used. The final chapters of the paper discuss various disaggregation models. EFRAG invites comments on the paper by 30 September 2009.