Primary financial statements

Date recorded:

Primary Financial Statements – Scope of the project – Cover note – Agenda paper 21


The purpose of this session was to ask the Board to decide on the scope of the research project on the Primary Financial Statements (PFS). The Staff will discuss the following papers in this meeting:

  • Scope of the project—statement(s) of financial performance – AP 21A
  • Scope of the project—other primary financial statements and segment reporting – AP 21B

Staff recommendation

The Staff recommends the following:

  • that the research focus on targeted improvements, mainly to the presentation of the statement(s) of financial performance (SoCI), rather than being a fundamental revision of the presentation of all the PFS.
  • that the research output takes the form of a Discussion Paper (DP), and that the DP:
    • (a) describes the problems that the Staff has identified on the presentation of the PFS;
    • (b) outlines preliminary views for improving specific presentation aspects;
    • (c) seeks feedback on the issues identified and possible alternatives for improvement;
    • (d) would apply equally to financial and non-financial institutions; and
    • (e) considers the impact for digital reporting, e.g. how the proposals would interact with or affect the delivery of content in XBRL.


All Board members were in favour of focusing on targeted improvements. Nevertheless, the Board generally felt that it was too early to decide whether the research output should take the form of a DP or an ED, as that depended on the nature of the issues that ultimately got explored in the project and the constituents’ response to those topics in future outreach activities.

There was also some discussion on how the PFS team should interact with the taxonomy team in working through this project.

Primary Financial Statements – Scope of the project – statement(s) of financial performance – Agenda paper 21A


This paper summarises the Staff’s recommendations for possible improvements to the structure and content of the SoCI that could be included in the PFS DP. The Staff’s recommendations are based on their initial research on the scope of the PFS project that was presented to the Board in its November 2016 meeting (see APs 21-21E to that meeting).

Staff recommendation

The Staff recommends that the DP explore the following topics in relation to the SoCI:

  • (a) requiring additional subtotal(s) in the SoCI, specifically, earnings before interest and tax (EBIT) and/or operating profit;
  • (b) removing some of the options for presentation of income and expenses in existing Standards (e.g. presentation of net interest cost on the net defined benefit liability);
  • (c) incorporating some commonly-used performance measures into Standards, including separate presentation of non-recurring, unusual or infrequently occurring items; and
  • (d) better ways to communicate information about OCI.


No vote was taken on this paper.

The gist of the discussion was on: (i) establishing a principle on disaggregation which would naturally lead to relevant subtotals being presented on the SoCI, (ii) how to present the SoCI to ensure that users understand what was the entity’s sustainable performance, and (iii) thought leadership on ways to draw people’s attention to OCI.

  • (i)    The Board agreed that the request for more subtotals was the manifestation of a more fundamental problem: the lack of a discipline around how information should be aggregated and disaggregated in the financial statements. The Board believed that the paper should focus on establishing such a discipline rather than on how many and what subtotals should be introduced. This was because they believed that if disaggregation was applied properly by management, it would naturally lead to the presentation of relevant subtotals without much need to define what each subtotal meant. A Board member relayed the message from some stakeholders that they were not too concerned about how an entity defined a subtotal, rather they wanted to know what adjustments had been made to that subtotal over the past, say, 5 years so that there was transparency about consistency.
  • (ii)    The Board agreed that the paper should not define ‘non-recurring’, ‘infrequent’, or ‘unusual’ (as stakeholders would likely not agree on them), but rather allow entities to take a management approach in identifying these items. The Board believed that the ultimate goal in presenting these items separately was to provide users with more transparent disclosures about what was persistent and sustainable of the entity’s performance. This should form the conceptual basis on which management identified these non-recurring/unusual items.

    The Board also asked the Staff to explore when an item should move from being recurring to non-recurring and vice-versa and to refer to the FASB project on the same topic to increase efficiency.

    The Staff agreed to incorporate the feedback received on the Principles of Disclosures (PoD) DP on the recurring/non-recurring issue when developing the PFS paper, and to move the related discussions from the PoD project to the PFS paper so that the topic would be dealt with comprehensively in one place.
  • (iii)    In order to give more visibility to OCI, a few Board members asked the Staff to evaluate the possibility of introducing ‘OCI per share’ to draw people’s attention to this neglected section of the SoCI.

Primary Financial Statements – Scope of the project — other primary financial statements and segment reporting – Agenda paper 21B


This paper summarises the Staff’s recommendations for the statement of cash flows (SoCF), the statement of financial position (SoFP), segment reporting, the development of templates for the PFS for particular industries, and the development of a principle for aggregating and disaggregating information in the PFS. The Staff’s recommendations are based on their initial research on the scope of the PFS project that was presented to the Board in its November 2016 meeting (see APs 21-21E to that meeting).

Staff recommendation

The Staff recommends that the PFS DP explore the following:

  • (a) eliminating the options for the classification of the cash effects of interest and dividends in the SoCF.
  • (b) aligning the operating section across the SoCF and the SoCI.
  • (c) what is the appropriate starting point for the indirect reconciliation of cash flows. The Staff believes that this reconciliation should have a single starting point and that this could be ‘operating profit’ from the SoCI.
  • (d) developing templates for the PFS for a small number of industries.
  • (e) developing a principle for aggregating and disaggregating items in the PFS.

The Staff further recommends that the DP not explore improvements to the SoFP, segment reporting or to the presentation of discontinued operations.


The Board approved the Staff’s recommendation, except for the SoFP where it was agreed that the Board would consider any necessary consequential amendments or implications to the SoFP arising from the proposed improvements to the SoCI and SoCF.

As regards the SoFP, one Board member believed that in order to classify the SoCI line items as operating, financing and investing, one would inevitably have to link to how the related assets/liabilities were classified on the SoFP (as operating, financing or investing). He therefore believed that the project should also explore improvements to the SoFP.  A lengthy discussion ensued on why other Board members thought it would not be feasible to include work on the SoFP in this ‘targeted’ improvement PFS project. The Staff also reiterated that users were not interested in reformatting the SoFP. In the end, the Board came to a compromise that the project would not exclude the SoFP entirely by noting that consequential amendments might be made to it depending on the improvements made to the SoCI and SoCF; however, such improvements would not be included as part of the PFS project objective.

As regards the development of templates, there was very strong opposition from a number of Board members. They believed that in order for the templates to be useful, the templates would have to address an industry (or a few industries) in detail and that the templates must be mandatory. However, this would be a time consuming exercise and the resulting templates might even conflict with existing regulatory requirements. If, on the other hand, the templates were not mandatory, then the Board members did not see much benefits in having them as entities would be reluctant to forsake their well-established industry practice and adopt these non-mandatory IFRS templates. Either way, they believed that this would be a waste of time and would delay the PFS project and move away from the ‘targeted’ approach to this project.

There was little or no discussion on the other issues.

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