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Financial statement presentation. Kim Petrone - FASB Senior Project Manager Denise Gomez - IASB Project Manager. Joint project of the IASB and FASB. Why a project on presentation?. Looking for a common approach (IFRS-USGAAP) convergence

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financial statement presentation
Financial statement presentation

Kim Petrone - FASB Senior Project Manager

Denise Gomez - IASB Project Manager

Joint project of the IASB and FASB

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

why a project on presentation
Why a project on presentation?
  • Looking for a common approach (IFRS-USGAAP)
    • convergence
  • Clarify relationship between the financial statements
  • Items with different characteristics lumped together (dissimilar items aggregated?)

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

what are we doing about it
What are we doing about it?
  • An IASB-FASB joint project
  • Not a comprehensive review on presentation
    • Evolution, not a revolution
  • Discussion paper with initial ideas for tailoring financial statements
  • Aim for completion by mid 2011

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

where are we in the due process
Where are we in the due process?

Q3 2008

2010

2011

Discussion paper:

FSP

Public consultation

Exposure Draft

Public consultation

Final standard

Additional input from:Working group, analysts, preparers, local standard setters, regulators and other groups and field tests.

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

project objectives and benefits
Project objectives and benefits
  • Establish a standard that will guide the organization and presentation of information in the financial statements
  • Provide an overall structure for financial statements that will:
    • allow enough flexibility to communicate unique aspects of a business
      • for preparers to better portray their business
      • for users to understand and “get the message”

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

project scope
Project scope
  • All business entities
  • All financial statements
  • Form, content, classification and display
  • Three phases to project:
    • Complete set of financial statements
    • Fundamental presentation issues
    • Interim reporting

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

project scope continued
Project scope (continued)

The project is not reconsidering:

  • Segment reporting
  • Earnings per share
  • Management commentary or MD&A
  • Recognition or measurement requirements provided in other standards
    • analysis of OCI items

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

main principles
Main principles

Financial statements should :

  • Portray a cohesive financial picture
  • Disaggregate information:
    • into sections and categories
    • separate financing from business activities and segregate discontinued operations
  • Present information about liquidity and financial flexibility

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

financial statement presentation9
Financial statement presentation

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

classification guidance
Classification guidance
  • Classification of A&L drives classification of changes in those items in:
    • Statement of comprehensive income
    • Statement of cash flows
  • Classification based on management’s approach of its business & financing activities
  • Each entity decides the order of sections and categories – same order for each statement

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

statement of financial position
Statement of financial position
  • Classification of assets and liabilities in short-term and long-term subcategories unless a presentation based on liquidity provides more relevant information
    • Not a current requirement in US GAAP
    • IAS 1 requires current / non-current distinction

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

comprehensive income
Comprehensive income
  • Single statement of comprehensive income
  • Disaggregation by function and further by nature of relevant items
  • Separate classification of OCI items with recycling
  • Profit or loss – relevant subtotal
  • Taxes should be allocated to:
    • continuing operations
    • discontinued operations
    • OCI items.

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

statement of cash flows
Statement of cash flows
  • Notion of cash equivalents would not be retained
  • Preference for direct method of reporting cash flows
    • Cash payments and cash receipts for operating category
      • Instead of reconciling profit or loss to operating cash flows (indirect method)
    • Same for investing and financing cash flows

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

reconciling the statements
Reconciling the statements
  • Considered: Full reconciliation of opening and closing balance sheet
    • Show links with cash flows and comprehensive income
    • Can be very complex
  • Proposed: More limited reconciliation of comprehensive income and cash flow showing disaggregation into:
    • Cash flows, accruals and systematic allocations, and recurring/non recurring remeasurements (eg fair value changes)

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

giving your feedback
Giving your feedback

Comment on the DP

  • Do you agree that financial statements should be cohesive?
  • Do you agree with the proposed new structure?
  • Should a direct method be used to determine cash flows?
  • Does the reconciliation schedule provide useful information?

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

next steps
Next steps
  • Discussion paper / Preliminary views document expected Sept 2008
  • Field test planned for 2nd half 2008

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

contact information
Contact information

Kim Petrone - FASB Senior Project Manager [email protected]

Denise Gomez - IASB Project Manager [email protected]

For more information: www.fasb.org or www.iasb.org

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

questions or comments
Questions or comments?

Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

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