Financial Statement Presentation

Date recorded:

The purpose of the July meeting on financial statement presentation was to discuss application of some, but not all, of the project's working principles. The goal was for the Board to reach agreement on the basic format for the financial statements (the sections and categories for each financial statement) that will be included in the initial discussion document. Issues regarding notation / labelling and recycling will be discussed at the September meeting.

The Board agreed in principle that there should be a distinction between business and financing. The Board is yet to discuss and finalise the exact terminology. The Board agreed with the following staff recommendations although some individual Board members expressed concerns about specific issues which the staff will work to resolve:

Summary of staff recommendations for how items would be presented in the financial statements

Following the table are defined terms and related application and implementation guidance.

Balance sheet

Statement ofcomprehensive income

Statement ofcash flows


  • Operating assets and liabilities
    • Operating working capital
    • Other operating assets and liabilities
  • Treasury assets

Business income

  • Operating income
  • Treasury income

Business cash flows

  • Operating cash flows
  • Treasury cash flows


  • Financing liabilities
  • Equity

Financing expense

Financing cash flows

  • Non-equity
  • Equity

Financing Section

  • Financing liabilities: all liabilities except those for which a financing component is not required (by the accounting literature) should be calculated separately.

An entity may choose to exclude items from financing if one or more of the following conditions are met:

  • (a) Initial recognition of the liability contains sufficient measurement uncertainty that the subsequent reporting of remeasurements as financing gains or losses would be misleading.
  • (b) The source of financing in question is not viewed by the entity as interchangeable with other sources of financing.
  • (c) The activity in question is viewed by the entity as a part of its overall business, and not as only a financing activity. Entities would not be permitted to move items in and out of the financing section, except by means of a change in accounting policy.

Notes to the financial statements should include:

  • The expenses and cash flows based upon the financing definition
  • A reconciliation between the above amounts and those actually reported on the face of the financial statements.

Business Section

Treasury Category

  • Treasury assets: all financial assets (as defined in accounting literature).

An entity may choose to exclude from the treasury category financial assets that are classified as operating working capital assets.

Bank overdrafts should be excluded from cash and cash equivalents and be treated as financing liabilities.

Cash and cash equivalents should be presented as a separate line item (or as a subtotal if 'cash' and 'cash equivalents' are presented separately) in the treasury category.

Operating Category

  • Operating working capital: the excess of operating working capital assets over operating working capital liabilities.
  • Operating working capital assets: assets reasonably expected to be realized or consumed in the operating cycle of the entity.
  • Operating working capital liabilities: liabilities that are incurred and reasonably expected to be settled in the operating cycle of the entity.
  • Other operating assets: assets that are not classified as treasury assets or operating working capital assets.
  • Other operating liabilities: liabilities that are not classified as financing liabilities or operating working capital liabilities.
  • Operating cycle: the average time between the acquisition of materials or services entering the process and their final conversion to cash.

Notes to the financial statements should include:

  • Information about the total amounts of assets, liabilities, and equity
  • Information that will help users assess the short-term liquidity of an entity should be provided in the notes to the financial statements based on the long-term/short-term approach.

Some Board members were concerned that the proposals appeared to provide preparers with a free choice of where in the financial statements certain items would be presented. Those members want minimum requirements to be introduced that will standardise presentation to a greater extent across preparers.

Other Board members indicated that they would like to see how derivatives are to be dealt with before subscribing to this approach.

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