Reporting Financial Performance

Date recorded:

The Board tentatively approved a new structural framework whereby one overriding principle for reporting performance is supported by five operational principles and a three 'practical limitation' principles. The limitation principles will initially constrain the format of the performance statement and are subject to further review.

The basic principle is that the primary basis for differentiating components of a performance statement should be enhancement of an investor's ability to predict the rate of change in financial statement items.

The basic principle should be supported by secondary principles that are designed to offer conceptual guidance in implementing the basic principle, including measurement basis, gross presentation vs. offsetting, distinguishing operating performance from financing and investing activities, segment reporting, segregating unusual or unexpected items, and differenting realised items from value changes. The Board concluded that the measurement principle should refer to 'current value' rather than 'present value' as initially suggested by the staff, to cover all types of current valuations (market values, fair values, present values, etc.). Under another principle, the performance statement should try to distinguish among (a) those items that were expected to occur, (b) those that were unexpected and relate to the current period, and (c) those that were unexpected and relate other periods.

The Board was asked to consider reporting of pension costs in the context of the aforementioned principles. The IASB expressed a preference for an unstructured approach (that is, no subheadings) of the information to be presented but splitting the various components into the items considered in principle 3 (expected, unexpected income of the year and unexpected income related to other years). The Board was subsequently asked to consider broadly what approach for presentation of pension related assets and liabilities it would prefer, and indication was given that the approach under the IASB's Concept Paper under preparation would be preferred (as opposed to the approaches proposed under the DSOP prepared by the former Performance Reporting Steering Committee or under ASB FRED 22 (revised)). However, this IASB Concept Paper approach will need considerable tailoring. The intent of the project team was to ascertain from the Board in very broad terms which routes to proceed down rather than approve a specific format.

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