Members of the European Financial Reporting
Advisory Group (EFRAG) think there should be an “evolution” of
financial statement presentation requirements rather then drastic
changes to the current model.

In its report to the International Accounting
Standards Board (IASB), EFRAG said its European constituents
believe the major concerns about the current presentation model
could be addressed through amendments or improvements to existing
International Accounting Standards (IASs) rather than
introducing a new presentation model, which would involve
substantial implementation and maintenance costs.  

The two standards cited were: IAS 1
Presentation of Financial Statements and IAS 7 Statement of Cash

According to EFRAG’s members in several
locations the costs to maintain the new presentation model would be
comparable to the effort associated with the initial adoption of
IFRSs in Europe.

Members also argued that current IAS 1 and IAS
7 are sufficiently flexible to allow an entity to present its
financial position and financial performance, in the way the
management manages that entity, and to ensure consistency between
internal and external reporting, which they say is vital for
effective communication between an entity and its stakeholders.

EFRAG members also called for the IASB to
address the “fundamental issues related to performance reporting,
namely, what constitutes performance and what is the impact of the
business model on it; where and how should the line be drawn
between profit and other comprehensive income (OCI), and whether
reclassification of OCI items (recycling) is needed”.

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Other highlights of the report include:

  • Members question whether the IASB should
    develop one generic presentation model for all industries or
    consider developing industry-specific models;
  • Generally members agree the proposals in the
    IASB draft would result in too much detail on the face of primary
    statements, obscuring key messages and would complicate rather than
    improve the communication between an entity and its stakeholders;
  • The majority of members participating in the
    outreach meetings were against mandating the direct method for
    presenting operating cash flows.