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Financial Statement Presentation

Date recorded:

Project scope

The FASB informed the IASB that at its last meeting it agreed to propose to require one statement of financial performance with subtotals for net income and other comprehensive income. The staff asked the Boards to clarify whether this decision means enlarging the scope of Financial Statement Presentation project or if a short term convergence project on this narrow topic shall be initiated.

Most of the IASB members agreed that a single statement of comprehensive income was always the aim of the Board and agreed to initiate a short term project that would eliminate the separate income statement option from IAS 1. One Board member noted that the Board had to be very careful and as transparent as possible, given the comments from constituents during the last proposed amendments to IAS 1. Nonetheless, concerns would be alleviated by the fact that FASB would propose the same amendment. The Board also agreed to include in the project separate presentation of recycling and non-recycling items within other comprehensive income (OCI).

The chairman of the IASB suggested a plan how to tackle the question of recycling in the long term. All members agreed that this question was outside of the scope of the short term project and rules would be governed by the applicable standards. Nonetheless, from a long-term perspective, principles embodied in the conceptual framework should be used to develop a principle-based approach for OCI presentation.

The Boards discussed the tentative timetable for the move to a single statement of comprehensive income. The FASB plans to expose the proposal together with the financial instruments proposal. The IASB will discuss the proposal in September.

The Boards discussed whether the IAS 1 amendment should be adopted at the same time as financial instruments standard. IASB members noted that even if IASB decided to adopt the FASB approach for financial instruments it could manage with the old IAS 1, as a separate statement of comprehensive income exists under IFRSs (under US GAAP is included in the statement of changes in equity).


Plan for Deliberations

The Boards considered the planned deliberations for the Presentation ED given the comments from constituents on the Discussion Paper (DP). The staff noted that despite overall support for the principles in the DP, many constituents were concerned by the application of the basic principles, especially in the area of presentation of direct method of statement of cash flows, level of disaggregation on the face of the statement of comprehensive income, and the reconciliation schedule as a whole. Some Board members noted that reconciliation schedule could be simplified by a balance-sheet-to-balance- sheet reconciliation.

The staff plans to obtain input from the project's advisory group on 27 July 2009 and finalise the analyst portion of the field test. The Boards agreed with the plan of deliberations in September and October meetings and a joint meeting, with the aim to publish ED in April 2010.


Proposed Presentation Objectives

The Boards were asked by the staff to provide a high level direction on the question of presentation objectives given the comments by constituents on the discussion paper. The Boards generally liked the idea of rewriting the presentation objectives and principles and linking them to objectives of financial reporting. Board members were much less convinced about the need and usefulness of linking of those principles to qualitative characteristics and constraints of decision-useful information. Those members believed that this linkage would not be operational.

After a significant discussion the Boards agreed that cohesiveness should remain one of the main principles, but a cost benefit analysis is needed when applying the principles at the line-item level. The Boards noted that cohesiveness should lead to comparability, not to uniformity. Some Board members challenged this approach, as they did not feel it would be operational, but another member presented a convincing example of the sale of subsidiary, where cohesiveness at line-item level could lead to huge complexity. Another Board member noted that a kind of uniformity in taxonomy is necessary, especially when XBRL is implemented.

The Boards agreed that disaggregation of decision useful information shall be the core presentation principle with a cost-benefit analysis applied.

The Boards discussed objectives of liquidity and financial flexibility. The Boards agreed not to include them as core presentation principles, as they are embedded in the Conceptual Framework. One IASB member seemed to be particularly concerned by demotion of the liquidity objective in the time of financial crisis. The FASB members seemed also to be concerned as Framework is not part of the authoritative guidance. The Boards agreed to make these features more prominent as part of disaggregation principle.

The Boards agreed not to add stewardship as one of the core presentation objectives.

Finally, the Board tentatively agreed that Presentation project should be applicable all business models, including those of financial services institutions. Several Board members were concerned about the need for specific requirements for financial services institutions and the usefulness of the proposed statement of cash flows and reconciliation schedules to financial services entities. The staff noted that this is only a preliminary decision and this will have to be confirmed at the time the ED is prepared. The staff noted that it would seek feedback from the Financial Institutions Advisory Group.

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