Financial Statement Presentation Changes
- by Theresa Hickman
On March 10, 2010, FASB and IASB came to an agreement on financial statement presentation. They have been discussing changes for some time, such as displaying more lines items and moving certain line items from equity to the P&L, and now it seems they have finally come to a joint decision and put it in writing.
I recently learned that there will be a trend to book nothing to equity and to convey everything in the P&L to take away any facility for companies to hide losses from its shareholders, investors, etc. (I'm exaggerating when I say book nothing to equity. Obviously, those items that already live there, such as stocks and dividends, would stay there.) But accounts like your CTA (Cumulative Translation Adjustment account) used to plug the gain or loss from equity translation would move from the equity section to your expense section. The rationale is that when you run translation, you're doing so for a subsidiary that you own, or simply put, it's a foriegn investment. Thus, the gains/losses of that foriegn investment should be itemized on your P&L and not buried in equity.
The FASB will include changes in financial statement presentation in its Exposure Draft that is planned for issuance at the end of April 2010.
Companies will be required to adopt the financial statement presentation provisions retroactively. Yes, that means companies will need to apply these changes to previously issued financial statements.
The FASB Summary of Board Decisions can be found at
"fasb.org".
