IASB's project "Primary Financial Statements"

Résumé du document

Over the years there has been a strong demand for the IASB to undertake a project on performance reporting. IASB's project "Primary Financial Statements" address those concerns, particularly regarding income and expenses.

Extraits

[...] EFRAG's 2006 report « What (if anything) is wrong with the good old income statement? » illustrates how some analysts consider separation of income and expenses and recycling techniques as inefficient: « the current reporting model is based around a net income notion and it uses recycling techniques to recognise items of income and expense that have previously been recognised outside net income within net income at the appropriate time. Some believe that there is no consistent, well-articulated and credible rationale underpinning the model—no such rationale has been developed to date and, in their view, no such rationale is capable of being developed. [...]

[...] Other critics fustigated notably the fact that the aggregation of non- homogeneous components convey contrasted information about financial performance in the same data. « The financial performance of an entity is made up of components that exhibit differing characteristics in terms of, for example, their nature, cause, function, relative continuity or recurrence, stability, risk, predictability and reliability. All these components are relevant to an assessment of financial performance and therefore need to be reported on in the statement of financial performance, although their individual characteristics mean that some will carry more weight than others. [...]

[...] With respect to statement(s) of financial performance, the rule appears to be variation even among the same industry. It appears that structure and content of the statement(s) of financial performance vary even among entities in the same industry. Indeed, while many entities present an operating profit subtotal that corresponds broadly to earnings before interest and tax (EBIT), yet these subtotals are often calculated differently. Besides, while many entities also present an adjusted operating profit (e. g., operating profit before non-recurring items), yet adjustments vary and lack transparency. [...]

[...] Possible improvements In the litterature review carried out by the IASB, possible improvements to the primary financial statements and segments were detailed. To enhance statement(s) of financial performance, recommendation is to create more subtotals, disaggregation and structure than specified in IFRS Standards, separate operating from financing activities, and possibly abstain to use OCI. Across primary financial statements, main recommendations are to align primary financial statements and to allow choice in reporting interest in the statement of cash flows. Finally, with respect to segment reporting, the litterature review recommend segments notes more detailed. [...]

[...] The decisions made can be no better than the quality of the information that supports them. If inadequate financial statements are an impediment to sound financial decision making, then their quality should be improved. » Source: CFA Institute's A Comprehensive Business Reporting Model: Financial Reporting for Investors (July 2007) Feedback from the Consultation process The IASB launched a consultation process for public comment of « investors » in August 2015, ending on 31 December 2015, in order to better understand their priorities with respect to financial reporting. [...]