(The article featured below is a selection from International Securities and Financial Reporting Update, which is available to subscribers of that publication.)

IASB Proposal on Financial Statement Presentation Receives Cool Reception

An IASB proposal to align the presentation of financial statements prepared in accordance with IFRS with those prepared in accordance with U.S. GAAP has received a cool reception from the accounting community. For example, Deloitte & Touche said that it is not desirable to act at this time since more fundamental issues related to financial statement presentation are under consideration by the IASB and FASB as part of the overall financial statement presentations project. Similarly, Grant Thornton noted that implementing the proposal will result in much confusion and "noise" for very little, if any, gain. Instead, the proposal should be considered as part of the overall substantive project.

Similarly, PricewaterhouseCoopers urged the Board to consider the financial statement project as a whole and not proceed separately with the presentation segment. Preparers, auditors and users of IFRS financial statements have experienced significant instability in accounting standards, noted PwC, and progressing with this segment will cause further instability in financial reporting without observable benefit. Moreover, the firm questioned whether progressing with this segment is a valuable use of the Board's limited resources at this time and recommended that the IASB accelerate the entire project rather than continue with this segment.

While also urging the Board to consider presentation as part of the overall financial statements project, KPMG agreed that earnings per share should be the only per share measure that is required or permitted to be presented on the face of the statement of recognized income and expense. KPMG also agreed with the proposal that income tax should be disclosed in relation to each component.

Ernst & Young flatly said that the IASB should not devote any more of its valuable time on this segment of the financial statements project. For example, the Board proposes a number of changes in nomenclature, but the proposed nomenclature is not mandatory. More broadly, in E&Y's view, the proposed changes do not represent significant convergence between IFRS and U.S. GAAP.

Moving on to specific proposals, E&Y does not support requiring the disclosure of income tax relating to each component of other recognized income and expense. The firm sees no rationale for presenting the tax effects on other recognized income and expense differently from the tax effects on individual components of profit and loss. In addition, E&Y believes that imposing such a requirement would increase information overload and may render the statement of other recognized income and expense less understandable.

In its comment letter, the European Federation of Accountants also questioned this piecemeal approach to financial statement presentation, while quickly adding that it supports the overall objective of the project to enhance the presentation of information in the financial statements and converge with U.S. GAAP. On substantive matters, the federation agreed conceptually that it may be useful to know the income tax related to each component since each component of other recognized income and expense may have a different tax rate than the rate applicable to the income statement. However, practically, the federation questioned the benefit of such disclosure for users and feared that it would overload the financial statements with potentially arbitrary information.