REPORTING FINANCIAL PERFORMANCE: AN ANALYSIS OF IASC'S AND OTHER INTERNATIONAL VIEWS

The International Accounting Standards Committee (IASC) recently published, together with the accounting standards boards in Australia, Canada, New Zealand, the United Kingdom, and the United States of America, a discussion paper, "Reporting Financial Performance: Current Developments and Future Directions." The paper is the sixth in a series of studies--published by the informal group of accounting standard-setters known as the "G4+1"--prepared to promote discussion of issues that may lead standard setters to develop new and improved accounting standards that are similar among participating countries and the IASC. The paper surveys recent accounting standards on the subject, and outlines areas of agreement and controversy on future developments in the reporting of financial performance, with the objective of finding a common way forward.

The principal authors of the paper are L. Todd Johnson, senior project manager on the research and technical activities staff of the Financial Accounting Standards Board (FASB), and Andrew Lennard, assistant technical director on the staff of the U.K. Accounting Standards Board (ASB). The recent accounting standards reviewed include those of the ASB, the New Zealand Financial Reporting Standards Board, the FASB, and IASC. Although there are some differences between these standards, they have many features in common:

* They all require the income statement to be supplemented by another statement in which some items of financial performance are reported;

* They all require financial performance to be reported on an "all-inclusive" basis, that is, all gains and losses are reported as a part of financial performance, and

* With the exception of IASC's standard, they all require a total, or overall summary measure, of financial performance to be reported.

* Further progress is needed on issues that have been identified as differences among the recent standards. The working group considered different possible approaches. They spanned a continuum, with each sharing certain general features with one or more of the other approaches and differing in terms of other features. The approach favored by a substantial majority of the working group reports financial performance in a single performance statement with three major components: 1) operating (or trading) activities, 2) financing and other treasury activities, and 3) other gains and losses.

The discussion paper provides the basis for further work toward a united approach by standard setters in different countries.

Copies of the Discussion Paper: "Reporting Financial Performance: Current Developments and Future Directions," may be obtained directly from IASC's Publications Department, 166 Fleet Street, London EC4A 2DY, United Kingdom. Telephone: +44 (0171) 427-5927, fax: +44 (0171) 3530562, e-mail: publications@iasc.org.uk at a price of $17 each. *