IASB Proposal on Updating Financial Statements and DisclosuresPosted: August 17, 2020
I recently had the privilege of leading a task force to assemble the AICPA Financial Reporting Executive Committee’s response to the IASB exposure draft on General Presentation and Disclosures (Primary Financial Statements). An article about the response, including additional quotes from me, can be found here.
I’m sure one of the first questions many of you may ask is: Why should we care about what the IASB is doing? The battle to move to one accounting standard setter was decided a few years ago and in the U.S., FASB rules, not IASB. While that’s true, that doesn’t mean U.S. CPAs are not impacted by IASB. To the contrary, many U.S. CPAs work for companies reporting under IFRS. Additional CPAs work for companies that, while issuing consolidated financial statements in U.S GAAP, also have to produce many IFRS-based reports for individual entities under statutory reporting rules.
In addition, as our letter states, U.S. investors are one of the largest user groups of IFRS, as they hold many trillions of dollars in securities issued by companies that report under IFRS. Anyone in the financial planning space has a significant need to know and understand what is going on in the IFRS world.
Finally, while this was not a joint project, any change IASB makes is sure to be on FASB’s radar as something to consider in the future. It’s better for all of us if we work with IASB to get things right in the first place rather than have to battle to create differences between FASB and IASB, if FASB takes up similar considerations in the future.
The IASB proposal includes:
- The creation of a new “unusual items” line item in the financial statement
- The disclosure of certain “management performance measures” in footnotes
- The segregation of the Income Statement into “operating, investing and financing” – but with different definitions than those used in the Statement of Cash Flows
- The division of equity investments and joint ventures into Integral and non-Integral
- The disaggregation of dissimilar immaterial items in the financial statements
You can see the response from your FinREC committee here.
The article and comment letter are short reads and should give you a solid idea of the most important changes being considered by FASB and our suggestions on how IASB should move forward.