American Accounting Association
Vol. 24, No. 2
The American Accounting Association’s
Financial Reporting Policy Committee’s
Response to the Preliminary Views on Financial
The Financial Reporting Policy Committee of the Financial Accounting and Reporting Section of the American Accounting Association
Mark Bradshaw, Carolyn Callahan, Jack Ciesielski, Elizabeth Gordon, Mark Kohlbeck, Leslie Hodder, Patrick E. Hopkins, Robert Laux, Sarah McVay, Thomas Stober, Phillip Stocken, and Teri Lombardi Yohn SYNOPSIS: The Financial Accounting Standards Board and the International Accounting Standards Board ͑hereafter, the Boards͒ issued the discussion paper Preliminary Views on Financial Statement Presentation in late 2008. The Boards propose to signiﬁcantly reconﬁgure the presentation of ﬁnancial statements to offer parallel statements with standardized partitions of each ﬁnancial statement into ﬁve categories: business activities, ﬁnancing activities, income taxes, discontinued operations, and equity. The allocation of transactions within these partitions will depend crucially on management’s assessment of each transaction ͑i.e., the management approach͒. In this paper we comment on the proposal, with particular emphasis on empirical evidence and relevant theories from academic research. We highlight beneﬁts of the proposed changes as well as some possible concerns. We conclude that the objective of providing a cohesive picture of activities through a uniform standardization of each ﬁnancial statement by activity is desirable, but the proposed criteria for how activities are categorized results in potentially aberrant or confusing outcomes. Thus, any dissatisfaction with the current ﬁnancial statement format may be replaced with other criticisms. Finally, the current proposal relies on the effectiveness of the management approach, which can only be successful if managers embrace the proposed structure.
Keywords: ﬁnancial statement presentation; ﬁnancial reporting; Financial Accounting Standards Board; International Accounting Standards Board.
This article is based on the comment letter written by the Financial Reporting Policy Committee of the Financial Accounting and Reporting Section of the American Accounting Association, which is charged with responding to discussion papers and exposure drafts related to ﬁnancial accounting and reporting issues. We appreciate the constructive comments received from two anonymous reviewers and Kathy Petroni ͑editor͒.
Submitted: April 2009
Accepted: October 2009
Published Online: June 2010
Corresponding author: Mark Bradshaw
he Financial Reporting Policy Committee ͑hereafter, the Committee or AAA FRPC͒ of the Financial Accounting and Reporting Section of the American Accounting Association is charged with responding to discussion papers and exposure drafts related to ﬁnancial accounting and reporting issues. The Committee is pleased to respond to an invitation to comment on Preliminary Views on Financial Statement Presentation ͑hereafter, the Preliminary Views͒ issued by the Financial Accounting Standards Board and the International Accounting Standards Board ͑hereafter, the Boards͒ on October 16, 2008.
In the Preliminary Views, the Boards propose to reconﬁgure the presentation of ﬁnancial statements to offer parallel statements with standardized partitions of each statement into ﬁve categories: business activities, ﬁnancing activities, income taxes, discontinued operations, and equity. This change, for example, would permit a user to follow these assets and liabilities through each of the statements ͑e.g., cash ﬂows to purchase an asset and revenue from the sale of the asset͒. The Boards intend for the allocation of transactions within these partitions to be based on management’s assessment of each...
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