This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Performance Reporting

Date recorded:

This is a joint project of the UK Accounting Standards Board and IASB. The project covers presentation and disclosure, not recognition and measurement.

The Board first discussed the principles that should underlie an enterpriuse's performance report.

  • Principle 1 accepted: Recycling of income and expense items should not be allowed, that is, items should be reported in the performance statement as income or expense only once. Profits should not be based on a notion of realisation. The Board noted that realisation means something different in different countries. In Europe and Asia realisation refers to net profit available for distribution. However, in the United States realisation refers to capital maintenance. A critical issue in Europe would be whether 'mark to market' gains are distributable. The Board noted that distributable profits are not an accounting issue but a legal issue of countries concerned. The focus of the standard should be to provide greater transparency and useful information to the investors. Transitional provisions will include disclosures (particularly narrative) as well as possibly dual reporting.
  • Principle 2 accepted: Information in the performance statement should help to predict rates of change so the users can make better judgements. Segment reporting will help with this. Segment reporting may be aggregated in the performance statement.
  • Principle 3 accepted: There is a need to distinguish between costs of debt and costs of equity -- to enable assessment of return on equity and return on total capital employed. However, practical concerns were noted, including ambiguity as to where pension or insurance costs should be classified.
  • Principle 4 rejected: A split between operating and non-operating profits should not be made as it could mislead users. In practice, many entities have more than one core operation and it can change with time so it is difficult to make such a split and it may not always be appropriate. The issue of whether gains and losses relating to the same activity can be netted against each other was not decided.
  • Principle 5 accepted: Differentiation between trading gains and holding gains was accepted as a working principle.
  • Principle 6 accepted: Changes in fair values of assets in a period should be split based on causes of the change, for example, value changes resulting from performance during the period, changes in economic conditions, and changes in market expectations. Some Board members raised concerns regarding the significant amount of judgement that would be required to make this split and its usefulness in helping to predict with the future. The concept was accepted but the detail will be developed at a later stage of the project.
  • Principle 7 accepted: There should be segregation of gains and losses recognised in the period that result from a choice of accounting convention. For example, the profit on disposal of a fixed asset will be different if the accounting convention chosen is historical cost rather than revalued amounts.
  • Principle 8 accepted: A prescribed format and subtotals for the performance statement is needed, but management should be given freedom to specify key performance indicators by having discretion over line items provided and the sequencing of those items. Management would not be allowed to add their own subtotals. Presentation of the performance statement needs to be discussed before the detail of this principle is decided.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.