IASB reviews the format of the income statement


Nick Anderson


Nick Anderson, Board Member at the IASB, urges investment professionals to share their views

Five years ago, when the International Accounting Standards Board (the Board) last  asked our stakeholders what we should be working on, we received a clear message that  improving performance reporting should be a priority. In response, the Board initiated the Primary Financial Statements project. 

Through this project we aim to improve communication throughout the financial statements, but with a particular focus on the statement of profit or loss (or the income statement). In December 2019 we published proposals that, if finalised, would replace the existing IAS 1 Presentation of Financial Statements.  

Our main proposals are directly driven by feedback from users of financial statements.  At the start of this project we held numerous meetings with investors and other users to help us identify the key issues and determine the project scope. A few common themes emerged in their feedback and, in response, three main sets of proposals were developed to respond to users’ concerns: 

  • Defined subtotals  
  • Disaggregation of information 
  • Management performance measures

First of all, users told us that the structure and content of the income statement varies between entities, even within the same industry.  This makes it difficult for them to assess and compare financial performance between companies. In other words, investors want more comparability.  To address this concern, the Board proposes to require defined subtotals in the statement of profit or loss so that all companies report them in a consistent way.  

Secondly, investors said that they sometimes do not get sufficiently granular information in the financial statements. In response, the Board proposes to strengthen requirements for disaggregating information in the financial statements.  

The third topic is about management-defined performance measures, or non-GAAP measures.  Investors told us that such information is useful to their analysis. However, they said this information should be reported in a more transparent and disciplined way. The Board proposes to define a subset of those measures as management performance measures and require disclosures about them in the notes to the financial statements.  

The Board is asking for comments by 30 September 2020. I would urge the investment community to share their views with us on these proposals. You can find further information about the General Presentation and Disclosures Exposure Draft and the accompanying Basis for Conclusions and Illustrative Examples

The Board will consider all feedback on the proposals in developing its final requirements and I encourage you to make your voice heard in developing this important area of performance reporting.

Nick Anderson was appointed as a member of the International Accounting Standards Board (Board) in 2017. He has 30 years of practical experience, mainly as a buy-side investor using and supporting the development of high-quality financial reporting. 

Mr Anderson was a member of the UK Accounting Standards Board from 2007 to 2013 and a founding member of the Corporate Reporting Users’ Forum (CRUF).

Disclaimer: The views expressed in the blog are those of the author and do not necessarily represent the views of CRUF participants.


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