Project Updates

Financial Statement Presentation—Joint Project of the IASB and FASB

Last Updated: May 13, 2009 (Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and FASB (the Boards). It was prepared by the staff and is for the information and convenience of the Boards’ constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

Project Objective
Due Process Documents
Summary of Decisions Reached to Date
*Next Steps
Board Meeting Minutes and Public Meeting Information
Background Information
Contact Information

Project Objective

The purpose of this joint project is to establish a standard that will guide the organization and presentation of information in the financial statements. The results of this project will directly affect how the management of an entity communicates financial statement information to users of financial statements, such as present and potential equity investors, lenders, and other creditors. The Boards’ goal is to improve the usefulness of the information provided in an entity’s financial statements to help users make decisions in their capacity as capital providers.

In their Phase B discussions, the Boards developed three objectives for financial statement presentation based on the objectives of financial reporting and the input the Boards received from users of financial statements and from members of their advisory groups. Those proposed objectives state that information should be presented in the financial statements in a manner that:

1. Portrays a cohesive financial picture of an entity’s activities. A cohesive financial picture means that the relationship between items across financial statements is clear and that an entity’s financial statements complement each other as much as possible.
    
2. Disaggregates information so that it is useful in predicting an entity’s future cash flows. Financial statement analysis aimed at objectives such as assessing the amount, timing, and uncertainty of future cash flows requires financial information that is disaggregated into reasonably homogeneous groups of items. If items differ economically, users may wish to take that into account differently in predicting future cash flows.
    
3. Helps users assess an entity’s liquidity and financial flexibility. Information about an entity’s liquidity helps users to assess an entity’s ability to meet its financial commitments as they become due. Information about financial flexibility helps users to assess an entity’s ability to invest in business opportunities and respond to unexpected needs.

Due Process Documents

Phase B

On October 16, 2008, both Boards published for public comment a discussion paper, Preliminary Views on Financial Statement Presentation. The FASB discussion paper and the IASB discussion paper are the same except for differences in style/format. The comment period ended on April 14, 2009.
View Comment Letters

The Discussion Paper is the result of more than two years of discussion by the Boards and consultation with the project’s advisory groups, the Joint International Group and the Financial Institutions Advisory Group, and other interested parties on the fundamental issues related to financial statement presentation.

The FASB held a webcast, Proposed Improvements to Financial Statement Presentation, on Tuesday, January 27, 2009 to discuss the recently issued Discussion Paper. The webcast was moderated by FASB member Marc Siegel; panelists were Peter Bridgman, Senior Vice President and Controller of PepsiCo, Inc; Greg Jonas, Managing Director of Moody’s Investors Service; Joe Joseph, Managing Director at Putnam Investments; and Kim Petrone, Senior Project Manager at the FASB. Access the archived event

Access the IASB Web presentation introducing the Discussion Paper

A “snapshot” of the Boards’ preliminary views also was published on October 16, 2008.

Phase A

The Boards completed their deliberations on Phase A in December 2005. On March 16, 2006, the IASB published its Phase A Exposure Draft, Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation. The FASB decided to consider phases A and B issues together and, therefore, did not publish an Exposure Draft on phase A. After considering the responses to its Exposure Draft, the IASB issued a revised version of IAS 1 in September 2007. The revisions to IAS 1 affected the presentation of changes in equity and the presentation of comprehensive income, bringing IAS 1 largely into line with FASB Statement No. 130, Reporting Comprehensive Income (Statement 130).

Summary of Decisions Reached to Date

Phase B: View a copy of the summary included in the October 2008 joint Discussion Paper: Preliminary Views on Financial Statement Presentation (Phase B).

Phase A: Summary of Decisions as of September 30, 2007

*Next Steps

As of April 14, 2009, the end of the 6-month comment period, the FASB received over 200 comment letters. A summary of the responses will be discussed at the joint Board meeting to be held in July 2009.

During the 6-month comment period on the Discussion Paper, 30 entities participated in a field test. As part of the field test, participant companies recast two years of financial statements using the principles and application guidance in the Discussion Paper and completed a survey about that recasting exercise.

The next step in the field test is for analysts to review both recast and non-recast financial statements and respond to a survey. The IASB and FASB are looking for users of financial statements to participate in this aspect of the field test. Please register your interest here.

After the analyst portion of the field test is complete and all the results are summarized, the Boards will discuss the field test results at a public meeting. The current plan is to hold that meeting in July 2009.

In addition to the field test, the Financial Accounting Standards Research Initiative (FASRI) is in the process of studying investor use of financial statements prepared using the proposed presentation model by conducting a series of controlled tests.

The Boards hope to learn about the costs and benefits of the proposed presentation model through that field test, FASRI’s study, the comment letters they receive on the October 2008 Discussion Paper, and discussions with interested parties during the comment period. They will consider all of that input when they redeliberate the issues addressed in this Discussion Paper during the next stage of Phase B, which will lead to publication of an Exposure Draft of a proposed standard. The Boards expect to begin redeliberating the proposed presentation model in September 2009, after meeting with the project's advisory groups in July 2009.

Board/Other Public Meeting Information

• Meeting Materials and Minutes

Background Information

In 2001, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) added to their respective agendas a project on reporting financial performance and conducted those projects independently of one another. In 2004, the Boards agreed that they should conduct a project of this nature jointly to promote the convergence of accounting standards used internationally. The FASB and IASB are sharing staff resources and research for this joint project. The joint project team consists of staff from the FASB, the IASB, and the ASBJ (Accounting Standards Board of Japan).

In agreeing to pursue their similar projects jointly, the Boards agreed to take a fresh look at the presentation of information in financial statements. The joint project has an expanded scope beyond presentation and display of items of income and expense; it addresses presentation and display on the face of the financial statements that constitute a complete set of financial statements. In April 2004, the Boards decided to approach the project in three phases:

1. Phase A would address the statements that constitute a complete set of financial statements and the periods for which they are required to be presented.
    
2. Phase B would address more fundamental issues relating to presentation and display of information in the financial statements, including aggregating and disaggregating information in each primary financial statement, defining totals and subtotals, and reconsidering the use of a direct or an indirect method of presenting operating cash flows.
    
3. Phase C would address the presentation and display of interim financial information in U.S. generally accepted accounting principles (GAAP). The IASB also may reconsider the requirements in IAS 34, Interim Financial Reporting.

*Advisory Groups

To further their research, the Boards and staff have been seeking input informally from the following groups on a regular basis: