At the 2011 CalCPA A&A conference, Suzan C. Dennis, CPA, discussed the FASB’s project to completely change the presentation of financial statements. I previously discussed that here. What she provided is background you won’t read in the official documents.
Just a quick recap. If you think about the current cash flow statement, you will recall that it summarizes cash flows in three sections: operating, investing, and financing. Transactions related to purchasing or liquidating investments or equipment are in the investing section. Loans and equity transactions are in the financing section.
To get a very rough picture of what’s involved in changing the financial statement presentation, imagine restructuring the balance sheet and income statement into the same format as a cash flow statement. The balance sheet and income statement will be broken out into:
- business section, which will have subsections for operating, operating financing, and investing
- financing section, which will have debt and equity transactions
- income tax transactions
So, on the balance sheet the assets and liabilities related to financing will be in the financing section. Operating assets and liabilities will be in the business section with further breakout between three different subsections.
What we typically see today of amounts for total assets, total liabilities, total revenue, or net income won’t be visible.
There is no exposure draft out. Ms. Dennis indicated we are not likely to see one soon because the FASB staff is overwhelmed with other projects. I don’t see it listed on the current technical plan for 2011 or 2012.
She indicated there is still pressure coming from FASB and the international board.
On the other hand, she indicated there is no support from the Big 4 and the staff draft report drew universally negative comments.
This project will take a long time to get to the draft and final stage because there is a lot of opposition and there are tremendous issues involved. There will be huge conversion costs and huge training costs.
Looks like we won’t be seen anything soon.