The American Accounting Association’s Financial Reporting Policy Committee’s Response to the Preliminary Views on Financial Statement Presentation

SYNOPSIS: The Financial Accounting Standards Board and the International Accounting Standards Board (hereafter, the Boards) 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 approach). 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 stateme...