Professional Documents
Culture Documents
by Peter Casson
Executive Summary
International Accounting Standard 1 (revised), Presentation of financial statements, requires
companies to report their performance in a statement of comprehensive income.
The International Accounting Standards Board (IASB) and the US Financial Accounting Standards
Board (FASB) have agreed to converge their financial reporting standards.
As part of the convergence, the IASB and FASB are developing a new standard that is likely to affect
the way in which performance is reported in the future.
Introduction
Financial statements prepared under International Financial Reporting Standards (IFRS) include a statement
of comprehensive income which, together with associated notes, report a companys performance for the
accounting period. The International Accounting Standards Board (IASB), an independent body, sets the
IFRS. The IASB took over responsibility for setting international accounting standards from the International
Accounting Standards Committee (IASC), which issued International Accounting Standards (IAS). The
IASB adopted the then existing IAS when it took over from the IASC, and the acronym IFRS is now used to
include both IFRS and IAS, as well as the interpretations developed by the International Financial Reporting
Interpretations Committee or the former Standing Interpretations Committee.
The presentation of a companys financial performance under IFRS is dealt with in IAS 1 (revised)
Presentation of financial statements. Revisions to the standard in 2007, which are in effect for accounting
periods beginning on or after January 1, 2009, include the requirement for reporting entities to present a
statement of comprehensive income.
The development of IFRS is shaped by an agreement reached between the IASB and the US Financial
Accounting Standards Board (FASB) to make their existing financial reporting standards compatible and to
coordinate work programs. The IASB and FASB are collaborating on a project entitled Financial statement
presentation, which may lead to further changes in the way entities report performance.
This article describes the essential features of reporting performance under IAS 1 (revised), possible future
changes to performance reporting standards, and non-IFRS performance measures.
Analysis of Expenses
A company is required to present an analysis of its expenses. The analysis may take one of two forms:
Conclusion
IAS 1 (revised) requires companies to present a statement of comprehensive income which includes the
profit or loss for the period together with other components of comprehensive income. The IASB assumes
that compliance with the provisions of the standard should ensure that companies provide users of financial
reports with key information that informs economic decisions.
Making It Happen
The preparation of a statement of comprehensive income, together with the accompanying notes,
requires compliance with IAS 1 (revised) and the application of IFRS with the overall objective of fairly
representing the transactions and other events of the reporting entity.
There may be circumstances in which a company needs to depart from IFRS in order to provide a fair
representation.
Users of financial statements should be aware of the accounting standards, and of any departures from
standards, in their analysis of the statement of comprehensive income.
More Info
Book:
Ernst & Young. International GAAP 2009. 2 vols. Chichester, UK: Wiley, 2009. Online at:
www.wiley.com/legacy/igaap09
Websites:
DeloitteIAS Plus: www.iasplus.com
International Accounting Standards Board (IASB): www.iasb.org
Notes
1 FASB/IASB, Discussion paper, preliminary views on financial statement presentation, October 16, 2008.
Online at: www.fasb.org/draft/index.shtml.