Can you picture the balance sheet and income statement rearranged so they look like the cash flow statement, with an operating, investing and financing section? No grand totals of assets or total revenue shown on the statement?
A FASB project is moving us in that direction. The “Staff Draft of an Exposure Draft on Financial Statement Presentation” outlines the changes. FASB and IASB are committed to moving this project forward. See the project update here. About 4 screens down on that page you can find a link to the staff draft.
More info – The California Society of CPAs has a superb article in their December magazine, available here.
What will this look like? Transaction on the balance sheet and income statement will need to be broken out so they are consistently classified from one statement to the next. For example, notes payable will be in the financing section (or maybe category) of the balance sheet, with interest expense in the same area of the financing section of the income statement and the cash proceeds or repayment on debt in the comparable section of the cash flow statement.
Exemptions? Nonprofit organizations, defined benefit & contribution retirement plans, and health and welfare benefit plans will not have to apply these changes (paragraph 4).
Timing? The FASB’s Current Technical Plan does not list any activity in 2011. This tells me an exposure draft probably won’t appear in 2011. You can make your own guesses for timing after that. The volume of activity on the project update page makes it quite clear to me that this is going to happen.
Other huge changes: Read the comments on disaggregation and cohesiveness. Comparative financials will be normative (paragraph 36). If there is a restatement or retroactive application of accounting change, an opening balance sheet will be needed. In that case, 3 balance sheets will be presented.
The article from the CalSociety linked above is superb. Check it out.
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