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Deloitte comments on financial statement presentation

  • Deloitte Comment Letter Image

13 Apr 2009

Deloitte's IFRS Global Office has submitted to the IASB a Letter of Comment on the Joint IASB-FASB Discussion Paper: Preliminary Views on Financial Statement Presentation.

While we agree with many of the proposals in the discussion paper, we have identified a number of issues that we feel are essential to the development of a financial statement presentation model that provides useful information for users and can be practically implemented by preparers, including those noted below:
  • Cohesiveness objective. While we support the cohesiveness objective, the subjectivity involved in determining the appropriate classification (that is, operating, investing, and financing) of certain items may lead to inconsistent practices among similar entities (or for similar items within the same entity). Therefore, more detailed descriptions of the classification categories and further clarity regarding the parameters to be used in determining the appropriate classification of financial statement items would be beneficial for preparers and users. Further, the Boards need to address and potentially develop specific requirements and disclosures in accounting for changes in the category classification of items from one period to another.
  • The management approach to classification of financial information. The management approach is appropriate because it provides management the ability to classify an entity's financial information based on the manner in which the underlying assets and liabilities are used, rather than specific rules dictating the presentation. However, there are certain practical concerns with such an approach, including a potential reduction in comparability of financial information among entities with similar operations and potential difficulties in determining classification due to the subjective nature of such an approach.
  • Direct method of presenting operating cash flows. The Boards should consider additional analysis to understand the benefits to users of presenting cash flows using the direct method and such benefits outweigh the cost.
  • Reconciliation schedule. We are concerned the proposed schedule (reconciling non-cash items and comprehensive income) may distract users from information that is relevant and create an unnecessary burden for preparers. Further, we are concerned this information, in addition to the information provided in the statement of cash flows under the direct method, is no different than the information presented under the indirect method of presenting cash flows.
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