Financial Statement Presentation
The financial statement presentation project was undertaken jointly by the FASB/IASB to establish a common, high-quality standard for presentation of information in the financial statements, including the classification and display of line items and the aggregation of line items into subtotals and totals.
The IASB/FASB Board’s objectives in this project are to present information in the individual financial statements (and among the financial statements) in ways that improve the ability of investors, creditors, and other financial statement users to:
(a) Understand an entity’s present and past financial position
(b) Understand the past operating, financing, and other activities that caused an entity’s financial position to change and the components of those changes
(c) Use that financial statement information (along with information from other sources) to assess the amounts, timing, and uncertainty of an entity’s future cash flows.
Is this project part of the Memorandum of Understanding?
Yes. The MoU sets out a Roadmap of Convergence between IFRSs and US GAAP 2006-2008. The MoU calls for issuance of one or more due process documents on the full range of topics in this project by 2008.
Click here for more information on the MoU.
Related projects
There are important interactions between this and other projects, such as post-retirement benefits (including pensions), income tax, insurance contracts and financial instruments. The work on IAS 1 will proceed in parallel with these other projects and will not wait for their outcome. This work may generate useful inputs for those other projects.
Next due process step
Phase A
Final standard
Phase A has been completed as a revised version of IAS 1 Presentation of financial statements was published in early September 2007.
Phase B
Discussion paper
The next due process step for Phase B is the publication of a Discussion Paper (Preliminary Views document - FASB), which is expected to be published in the third quarter of 2008.
Due process steps completed
Stage 1: Setting the agenda
In September 2001 the Board added to its agenda the performance reporting project (in March 2006 renamed the ‘financial statements presentation project’). The objective of the project was to enhance the usefulness of information presented in the income statement. The Board developed a possible new model for reporting income and expenses and conducted preliminary testing. Similarly, in the United States, the Financial Accounting Standards Board (FASB) added a project on performance reporting to its agenda in October 2001, developed its model and conducted preliminary testing. Constituents raised concerns about both models and about the fact that they were different.
In April 2004 the Board and the FASB decided to work on financial statement presentation as a joint project to further the goal of promoting convergence of accounting standards used internationally.
They agreed that the project should address presentation and display not only in the income statement, but also in the other statements that, together with the income statement, would constitute a complete set of financial statements—the balance sheet, the statement of changes in equity, and the cash flow statement.
Stage 2: Project Planning
The project is being conducted jointly with the FASB in three phases:
• Phase A - addresses what constitutes a complete set of financial statements and requirements to present comparative information.
The IASB and FASB completed deliberations on this Phase.
• Phase B - (current phase) addresses more fundamental issues for presentation of information in the financial statements, including:
- consistent principles for aggregating information in each financial statement.
- the totals and subtotals that should be reported in each financial statement.
- whether the direct or the indirect method of presenting operating cash flows provides more useful information.
- whether components of other comprehensive income should be reclassified to profit or loss and, if so, the characteristics of the transactions and events that should be reclassified and when reclassification should be made.
- Phase C - which has not yet begun, will address presentation and display of interim financial information in U.S. GAAP. The IASB may reconsider the requirements in IAS 34, Interim Financial Reporting.
Stage 3: Development and publication of a discussion paper
Phase A
A discussion paper is not a mandatory step in the IASB Due Process Handbook. A discussion paper was not considered necessary for this phase because the Board’s objective was not to reconsider all the requirements of IAS 1.
Phase B
A discussion paper on Phase B issues is expected to be published during the second quarter of 2008.
As a first step to developing that paper, in March 2006 the Board agreed to working principles for Phase B of the project which focus on the fundamental issues for presentation and display of information in the financial statements.
In brief, the working principles state that the financial statements should:
(a) provide a cohesive financial picture of an entity;
(b) separate the financing activities from other activities;
(c) disaggregate information and present relevant subtotals and totals.
(d) provide information to help users assess the entity’s ability to meet its financial commitments and invest in business opportunities;
(e) provide information about the measurement of assets and liabilities;
Since March 2006 the Board has been discussing the application of those working principles at Board meetings. At December 2007, this discussion is still in progress.
Click here for updated information about immediate plans and status of the project
Stage 4: Development and publication of an exposure draft
Phase A
On March 16, 2006, as a result of its work in phase A, the Board issued an Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation. The comment period for the exposure draft ended on July 17, 2006.
The FASB decided that it would not publish a separate Exposure Draft on Phase A of the project. Rather, it will expose its Phase A decisions along with its Phase B decisions.
Phase B
An Exposure Draft will be developed after the comment period for the Discussion Paper has ended.
Stage 5: Development and publication of an IFRS
Phase A
IAS 1 Presentation of financial statements was published in early September 2007.
Phase B
This stage has not been initiated for Phase B.
Stage 6: Procedures after an IFRS is issued
For Phase A, the IASB may consider holding meetings with interested parties (standard setters, SAC, IFRIC, other constituents) to help understand issues related to the practical implementation and impact of IAS 1 (revised 2007).
For Phase B this step has not been initiated.
WORKING AND ADVISORY GROUPS
Joint International Group
At the April 22, 2004 joint Board meeting, the Boards directed the staff to form a Joint International Group (JIG) to assist the Boards and staff in identifying issues to be considered in this project and developing proposed solutions. The JIG consists of senior professionals with extensive experience in and responsibility for the preparation, analysis, audit, and regulation of financial statements.
The Working Group has met:
- 14 June 2005
- 13 January 2005
- 15 September 2006
- 14 September 2007 (with participation of FIAG members)
The JIG has also provided its input on the application of some of the working principles.
Click here for a list of JIG members.
Financial Institutions Advisory Group
The Boards formed a Financial Institutions Advisory Group (FIAG) in September 2006 to assist them in addressing presentation issues from the perspective of those who analyse and prepare financial institution financial statements. FIAG members have been drawn from current IASB working groups (ie Insurance and Financial Instruments Working groups).
Communication with FIAG members is mainly conducted by email and telephone conferences. FIAG members will participate in the JIG meeting on 14 September 2007.
Click here for a list of FIAG members
Further information
- A joint project update is hosted through FASB’s web page. Click here to access that update where you can find more information on the conduct and status of the project.
- Click here for the Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation (ED IAS 1) .
- Click here for comment letters on ED.
Project contacts: